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Full text of "ANNUAL REPORT - ONTARIO ENERGY BOARD 1996-1997"

Ontario 



ONTARIO 

ENERGY 

BOARD 



ANNUAL 
REPORT 



1996-1997 



\/ 




/ / I \ \ \ \ 
Table of Contents 

Message from the Chair 2 

Board Members 5 

OEB Mandate, Roles and Resources 7 

An Evolving Energy Marketplace 12 

Streamlining Regulation and Operations 16 

1996-97 Regulatory Agenda 21 

Ontario Hydro Hearing 21 

Natural Gas Rates Hearings 22 

Other Proceedings 27 

Other Regulatory Matters 29 

Pipeline Applications 31 

List of Proceedings 34 

List of Participants 39 

Glossary of Terms 41 

\ 



ISSN 0317-4891 



Ministry of 
Energy, Science 
and Technology 

Office of the 
Minister 

Hearst Block 
900 Bay Street 
Toronto ON M7A 2E1 
Tel. (416)327-6715 
Fax (416) 327-6754 



Ministere de 
I'Energie, des Sciences 
et de la Technologie 

Bureau du 
ministre 

Edifice Hearst 
900, rue Bay 
Toronto ON M7A 2E1 
Telephone (416) 327-6715 
Telecopies (416) 327-6754 




Ontario 



The Honourable Hilary M. Weston 

Lieutenant Governor of the Province of Ontario 



I hereby submit the annual report of the Ontario Energy Board. It reviews the 
events and activities of the fiscal year ending March 31 , 1997. 



Respectfully submitted, 




Jim Wilson 

Minister of Energy, Science and Technology 



® 



0761 G EST (10/97) 



100% Recycled Chlorine Free. Made in Canada 




Message From The Chair 




OCJR CHALLENGE IS 



TO FACILITATE THE 



DEVELOPMENT OF A 



HEALTHY COMPETITIVE 



ENVIRONMENT WHILE 



BALANCING THIS 



WITH THE REQUIRE- 



MENT TO PROTECT 



THE PUBLIC INTEREST. 



■NnBHMnHHBaMHiiHBnHHaaHBBBnBiHHBanHBB 



Regulator's role is 
to facilitate develop- 
ment of competitive 

MARKET 

As competition throughout the energy sector 
develops, the regulator is faced with the need for 
reform. Our challenge is to facilitate the develop- 
ment of a healthy competitive environment while 
balancing this with the requirement to protect the 
public interest. 

The need for economic regulation diminishes as 
an industry becomes more competitive. Since a 
well-functioning market should 
provide results that are efficient, 
equitable and sustainable, regula- 
tors should step aside and let 
the market prevail. Where such 
conditions exist, regulators 
should regulate only when 
necessary to prevent abuse 
arising from monopoly power or 
market imperfections. 

The Ontario Energy Board (OEB) 
has already begun to change its 
regulatory approach. Under the existing legislation, 
only local distribution companies (LDCs) are 
permitted to sell gas to end users in Ontario. In 
order to assist the development of a competitive 
natural gas market in the province, the Board has 
authorized purchasing mechanisms that allow gas 
users to purchase their gas supplies directly from 
producers or through an agent, broker or marketer 
and have them distributed by the LDC. 




This year, the Board accepted a new direct 
purchase option, Agency Billing and Collection 
(ABC) service, in which directly purchased gas 
supply charges appear on the customer's utility 
bill. The advent of this service marks a large step 
in the move towards a truly competitive market. 
Customers more clearly than ever are being 
invited to make choices and assume risks. 

These mechanisms have allowed direct purchase 
transactions to take place, but only as a second- 
best solution. Therefore, in late 1995, the Board 
initiated a Market Review to consider options for 
eliminating market barriers and 
inefficiencies and to explore the 
potential for further deregulation. 
The review began with industry 
workshops which formed the basis 
for a Board Report issued in 
September 1996. This Report, in 
turn, was provided to an industry 
working group in a process that 
continues at year end. 

In the transition from a monopoly 
environment for commodity sales, 
the regulator has an obligation to ensure that 
service quality does not suffer and that the 
benefits of competition accrue not only to commer- 
cial interests, but to all customers. A major issue 
facing the Board as the commodity market evolves 
relates to the customer protection aspects of 
deregulation. It is crucial that customers, especially 
the small-use customers, are properly informed of 
the new choices open to them and are aware of 
the potential benefits and risks associated with 



those choices. For instance, as a condition of 
approving ABC service, the Board required 
preparation of a customer information package to 
ensure that all ratepayers were informed of their 
purchasing options and the consequences. 

The maturity of the natural gas market is leading 
to changes in industry structure and engendering 
further regulatory issues. For example, two Ontario 
gas utilities have established their own marketing 
affiliates, to compete head on with brokers in the 
direct purchase market. Recognizing the potential 
for these affiliates to gain preferential access to 
monopoly services and customer information, 
the Board this year set in motion a process to 
establish rules governing the utilities' relationships 
with marketing affiliates and other marketers. 

At the same time, utilities are diversifying into 
business areas where their expertise conveys a 
competitive edge, such as construction of water 
pipelines and reading of water and electricity 
meters. Following a public forum on this issue, the 
Board issued a Report which advised the govern- 
ment that diversification into non-regulated 
business should not be prohibited, as long 
as ratepayers are protected against adverse 
consequences and recommended a number of 
regulatory controls to achieve this. 

In this fluid environment, the energy regulator may 
need to share oversight responsibility with other 
government agencies dealing with anti-competitive 
practices, such as the federal Competition Bureau 
and the provincial Ministry of Consumer and 
Commercial Relations. The Board has begun to 
liaise with these organizations to develop a mutual 
understanding of our respective roles in protecting 
consumer interests and maintaining a level playing 
field for all market participants. 



Competition has gained momentum in the natural 
gas industry, and a similar trend is rapidly emerging 
in Ontario's electricity sector. Given Ontario 
Hydro's reliance on export markets and customer 
demand for competitively priced electricity choices, 
most observers agree that the status quo is not an 
option. 

The Advisory Committee on Competition in 
Ontario's Electricity System in June 1996 recom- 
mended the introduction of competition in power 
generation, with open access to the provincial 
transmission grid. While awaiting the government's 
response to the Macdonald Committee report, the 
OEB has attempted to keep abreast of electricity 
restructuring developments to prepare for any 
regulatory roles the government may assign us in 
the electricity sector. 

The changing world of energy has led to changes 
in the way the Board does business. In the past, 
our role has been principally a reactive, quasi- 
judicial one of holding public hearings in response 
to applications. While this will continue to an 
extent, the Board will take on a stronger regulatory 
policy-making role to shape the ground rules for 
the operation of the new marketplace. Regulatory 
oversight in the future will require an enhanced 
level of compliance monitoring, auditing and 
enforcement to hold the regulated utility account- 
able for following the new rules and procedures, 
such as those governing affiliate transactions. 

In anticipation of these altered responsibilities, the 
Board this year planned and began implementing a 
major internal restructuring. Our new organizational 
structure will strengthen our research and 
policy development and auditing and monitoring 
capabilities. 



The Board is also taking action to modernize the 
hearing process. In February 1997, we issued our 
Rules of Practice and Procedure, updating and 
finalizing the previous draft rules. The new rules 
provide more detailed provisions for settlement 
conferences and other pre-hearing processes, and 
introduce procedures for electronic and written 
hearings. 



between the Board and key stakeholders on 
matters of process. At the same time, the Board is 
relying more on informal processes such as work- 
shops, consultatives and open forums to address 
key issues. This less adversarial approach enables 
the energy industry to develop its own answers 
while permitting the Board to take a less intrusive 
stance. 



The OEB and the National Energy Board are collab- 
orating on an Electronic Regulatory Filing project 
to build a system for accessing and sharing of 
regulatory information electronically among all 
regulatory participants. A cost-benefit analysis 
completed this year was encouraging, and 
indicated that electronic filing would represent a 
sound investment in streamlining the regulatory 
process. 

The Board continues to seek and experiment 
with creative alternatives to traditional forms 
of economic regulation in order to maximize 
regulatory flexibility. For example, this year we 
adopted a generic rate of return model setting a 
formula to be used in calculating the rate of return 
on common equity. In addition, legislation was 
pending in the Legislature at year end to give the 
Board the power to establish a more flexible 
approach to setting rates, clearing the way for 
performance or incentive-based as compared to 
cost-based regulation. 

In the past, regulators may have been reluctant to 
maintain close contact with the regulated industry. 
In the transition to a competitive market, however, 
regulatory efficiency can be enhanced through 
closer interaction with industry participants. 

This conclusion prompted the Board to create an 
External Advisory Committee, which has proven 
of value as a two-way communications vehicle 



In February 1997 the Government Task Force 
on Agencies, Boards and Commissions, chaired 
by MPP Bob Wood, submitted its Report on 
Restructuring Regulatory and Adjudicative 
Agencies. The Report recommended that the 
OEB continue in its present form, as a stand- 
alone agency. 

In addition to reviewing 79 government bodies, the 
Task Force made recommendations to streamline 
the administrative justice sector as a whole. I am 
pleased to serve on the government-wide Working 
Group which is assisting the Agency Reform 
Commission to co-ordinate agency reform pro- 
jects. OEB staff are also involved in the agency 
reform initiative. 

We at the Board look forward to continued 
co-operation with energy industry stakeholders to 
foster the evolution of competition and maximize 
the benefits for Ontario. It is our expectation that 
further gains can be achieved through increased 
deregulation, better consumer education and 
broader customer choice. Working together, 
I am confident we will find creative solutions to 
attain this vision. 




1arie C. Rounding 
Chair 







Board Members 



(As of March 31, 1997) 



Chair: 

Marie C. Rounding, a lawyer and former 
teacher, has been Chair of the Ontario Energy 
Board since January 1992. She has held a number 
of senior positions with the Ontario Ministry of the 
Attorney General, with a focus on administrative 
and regulatory law. Immediately prior to joining the 
Board as Chair, she was Director of the Crown 
Law Office — Civil Law. Ms. Rounding is active in 
the administrative justice community, having com- 
pleted a term as Chair of the Canadian Association 
of Members of Public Utility Tribunals in 1996-97 
and now serving as Past Chair. She is also a 
member of the Board of Directors of the Council 
of Canadian Administrative Tribunals and President 
of the Board of Governors of the Society of 
Ontario Adjudicators and Regulators. 

Vice-Chair: 

^/ Appointed Vice-Chair in June 1993, George A. 
Dominy has extensive experience in the energy 
field in both the private and public sectors. Prior 
to joining the Board, he served as Director — 
Electricity, Oil and Gas Branch at the Ministry of 
Environment and Energy. Mr. Dominy holds a 
Masters degree in mathematics from Cambridge 
University. 



Members: 



Pamela W. Hardie, a lawyer formerly with the 
Ontario Securities Commission, joined the Board in 
July 1990. She has had experience with other 
boards and with the Office of the Ombudsman. 



Edward J. Robertson became a Board 
Member in May 1992. Before joining the Board, 
he was Chairman of the Manitoba Public Utilities 
Board. He has extensive private sector experience 
in the United Kingdom, including service from 
1972 to 1977 as a Director of the Confederation 
of British Industries in London, England. He 
entered the Ontario Public Service in 1977. 



*a 



aul Vlahos was appointed to the Board in 
October 1994. He formerly held positions with 
Union Gas Limited and the Ontario Energy Board. 
Prior to becoming a Board Member, Mr. Vlahos 
served as General Manager — Ontario Telephone 
Service Commission. He holds a Masters degree 
in economics. 

y/ H. Gail Morrison, a lawyer, was appointed to 
the Board in March 1996. Ms. Morrison, who 
joined the Ontario Public Service in 1982, 
previously held various positions in the Office of 
the Ombudsman and was most recently Executive 
Co-ordinator with the Environmental Assessment 
Board. She holds Masters degrees in law and 
physics. 

\S Roger M.R. Higgin was appointed to the Board 
in September 1996. Prior to joining the Board, 
Dr. Higgin was General Manager and Chief 
Operating Officer of Unisearch Associates Inc. 
He has held a number of senior positions in the 
former Ministries of Environment and Energy, 
including Assistant Deputy Minister — Programs 
and Technology Division, and previously served 
as a member of the Ontario Energy Board from 
1988 to 1991 . Dr. Higgin holds a doctorate in 
chemical engineering and a Master of Business 
Administration. 



We at the Board 

look forward 

to continued 

cooperation with 

energy industry 

Stakeholders 

to foster the 

evolution of 

competition and 

maximizing the 

benefits for 

Ontario. 



/ /1 1 1 \\\ \ 



Judith B. Simon, an environmental scientist, 
was appointed a part-time Board Member in May 
1992. She formerly held managerial positions with 
the Ministries of Industry, Trade and Technology 
and of the Environment, and was an energy planner 
with the Ministry of Energy. She is currently a 
consultant specializing in environmental assess- 
ment and strategic planning. 



Christine Elwell, a lawyer, joined the Board as 
a part-time Member in April 1995. She holds a 
Master of Laws degree from the London School of 
Economics and Political Science. Ms. Elwell has 
previously worked in the petrochemical and nuclear 
industries in both Alberta and Ontario, in labour 
relations and environmental policy, and is currently 
an Adjunct Professor of Law at Queen's University. 



F. Anne Drozd is a fellow of the Institute 
of Chartered Accountants of Ontario. She is 
President of ACHOS, a management consulting 
firm. Ms. Drozd has practiced as a Certified 
Management Consultant since 1982 and has 
extensive experience in the regulatory environ- 
ment. She was appointed a part-time Board 
Member in April 1993. 



\q Judith Allan served as a Board Member for a 
portion of the year. Previously with TransCanada 
PipeLines Limited, Ontario Hydro and the Ministry 
of Energy, she was appointed to the Board in 
September 1990 and completed her term in 
September 1996. 







OEB Mandate, Roles 
and Resources 






The Ontario Energy Board (OEB) is a regulatory 
agency of the Ontario Government, reporting to 
the Minister of Energy, Science and Technology*. 
As a quasi-judicial tribunal, the Board 
functions independently from the government. 

Board 
Responsibilities 

Most of the OEB's responsibilities are established 
in the Ontario Energy Board Act. In addition, 
several other statutes give jurisdiction to the 
Board, including the Municipal Franchises Act, 
the Petroleum Resources Act, the Public Utilities 
Act, the Assessment Act and the Toronto District 
Heating Corporation Act. 



and the revenue required by the utility to pay its 
expenses and make the allowed return. Finally, 
the Board decides how each customer class — 
residential, industrial and commercial — 
should contribute to meeting this revenue 
requirement 

The OEB's primary objective when setting rates 
is to ensure that the public interest is served and 
protected. The Board sets rates as low as possible 
while providing utility investors an opportunity 
to earn a fair return. If a utility's financial picture 
changes significantly between rates hearings, the 
Board may hold an interim hearing to grant relief to 
either the company or its customers. 



The OEB's primary 



OBJECTIVE WHEN 



SETTING RATES IS 



TO ENSURE THAT 



THE PUBLIC INTEREST 



IS SERVED AND 



PROTECTED. 



Approving Natural Gas Rates 

In Ontario, private gas utilities are required by 
legislation to submit their proposed rates to 
the OEB for review and approval. The Board 
establishes rates for each utility following a public 
hearing. Where users purchase gas directly from 
producers or marketers, the OEB controls the 
rates that utilities may charge for transporting, 
storing and distributing the gas in Ontario. The 
Board also establishes the price that the utility 
pays for gas purchased directly under buy-sell 
arrangements. 

In setting rates, the Board establishes the 
company's rate base, that is, the amount 
invested in assets dedicated to service. The 
Board also determines the rate of return that 
investors should have the opportunity to earn, 



Ontario's Gas Pipeline System 




LEGEND 

»••••• TransCanada PipeLines 

Union Gas 

— — *- Centra Gas 
ooooo Great Lakes 
raono Panhandle Eastern 
kmmm3 Empire State 
«**■■» Tennesse Gas 
am— mi Iroquois 



Reviewing Ontario Hydro Rates 

Ontario Hydro is required by law to submit any 
proposed change in its bulk power rates to the 



'Provincial energy responsibilities were transferred from the 
Ministry of Environment and Energy to the new Ministry of 
Energy, Science and Technology in October 1997. 




////WW 



Minister of Energy, Science and Technology, who 
then refers the proposal to the Board. Bulk 
power rates are the wholesale rates that Hydro 
charges municipal utilities and direct industrial 
customers. 

After a public hearing, the OEB submits its Report 
with recommendations to the Minister. The Board's 
role is an advisory one and its recommendations 
are not binding. Ontario Hydro's Board of Directors 
is responsible for the final approval of the utility's 
bulk power rates. 

References and Generic Hearings 

The Lieutenant Governor in Council (LGIC), the 
Minister of Energy, Science and Technology or the 
Minister of Natural Resources may refer a matter 
to the Board for a public hearing and report. 
The OEB's Reports are normally advisory in 
nature. The Board may also hold generic 
hearings on its own initiative on matters 
under its jurisdiction. 

Gas Transmission Pipeline Construction 

Utilities intending to construct a natural gas 
transmission line in Ontario must obtain Board 
approval. Such projects generally involve 
large-diameter, high-pressure pipelines with 
substantial capital costs and environmental 
implications. The Board assesses whether 
the proposed construction is in the public 
interest by considering need, safety, economic 
feasibility, community benefits, security of 
supply and environmental impact. The OEB's 
Environmental Guidelines set out the 
Board's expectations for locating, constructing, 
and operating pipelines in Ontario. 

Before a formal application is filed with the Board, 
a pipeline construction proposal is reviewed 
by the Ontario Pipeline Co-ordination 



Committee (OPCC). Chaired by an OEB staff 
member, the OPCC represents various provincial 
ministries who together consider the environmental 
and safety aspects of pipeline construction. 
Regional agencies also take part in the discussions 
as necessary. 

In conjunction with a pipeline approval, the OEB 
may also grant authority to expropriate land, and 
authorize pipeline crossings of highways, utility 
lines and ditches. 

Natural Gas Franchise Agreements 

Each municipality may grant a gas utility the right 
to provide gas service and use road allowances or 
utility easements within its borders. The specific 
terms and conditions of the franchise agreement 
must be approved by the Board. 

Natural Gas Franchise Areas 



QUEBEC 




□ 



CONSUMERS GAS 

UNION 

CENTRA 



UNITED 
STATES 



Certificates of Public Convenience and 
Necessity 

No person is allowed to construct any works to 
supply gas without Board approval. This approval, 
in the form of a certificate, is not given unless 
public convenience and necessity support the 
extension of service. 















Gas Storage Facilities 

Natural gas may not be injected into a geological 
formation in Ontario unless the land is designated 
as a storage area. The Board recommends to the 
LGIC areas that are suitable for designation. The 
Board may authorize the use of the storage area 
once the LGIC has approved designation. The 
OEB also determines the compensation payable 
to the owners of land where the storage pools 
are situated, if the parties cannot agree among 
themselves. 

In addition, applications for drilling permits for wells 
within designated gas storage areas are referred to 
the Board for a report to the Minister of Natural 
Resources. The OEB's recommendations in these 
cases are binding. 



Gas Utility Ownership Changes 

Under the Ontario Energy Board Act, a natural gas 
utility must obtain permission of the LGIC to sell 
its system or amalgamate with another company. 
LGIC approval is also necessary when any person 
wishes to acquire or hold more than 20 per cent 
of any class of shares. Applications for such 
changes in ownership of utilities must be made 
to the Board, for a hearing and report. 

Compliance with Undertakings 

In consideration for certain approvals obtained 
from the LGIC, the gas utilities have provided 
specific undertakings. The Board is responsible 
for administering many of these undertakings 
or commitments. This role involves monitoring 
compliance with the terms of undertakings, 
approving exemptions and reporting to the 
Minister of Energy, Science and Technology or 
the LGIC. 



OEB Regulatory Activities 1996-97 














Days 


Case Type 


Applications 


Decisions 


Orders 


Hearing 


Workshop/ 










(General) 




Forum 


Franchise Approvals 




64 


17 


45 


5 


- 


Certificates of Public 














Convenience & Necessity 




21 


10 


10 


19 


- 


Pipeline Construction 




5 


3 


3 


26 




Reference from Minister 














of Natural Resources 




3 


2 


- 


2 


- 


Natural Gas Rates 




7 


2 


5 


81 


- 


Hydro Bulk Power Rates 




1 


1 


1 


29 


- 


Pipeline Exemptions 




1 


- 


6 


- 


- 


Uniform Accounting 














Orders 




4 


- 


2 


- 


- 


Undertakings 




6 


5 


- 


- 


- 


Other 




6 


1 


1 


13 


- 


Market Review 




- 


- 


- 


- 


2 


Diversification 




- 








2 


TOTALS 




118 


41 


73 


175 


4 



Note: The above statistics relate to cases/activities initiated this fiscal year or continued from prior years. 



Board Organization 

The OEB has seven full-time Members including 
the Chair and Vice-Chair, plus three part-time 
Members. It is a multi-disciplinary group comprised 
of economists, lawyers, accountants and business 
people familiar with the energy industry. 

Members are appointed by the LGIC for terms of 
up to three years, upon the recommendation of 
the Minister of Energy, Science and Technology 
after consultation with the OEB Chair. The Board 
normally sits in three-member panels to hear major 
cases, but two Members constitute a quorum. 

The OEB operated with an approved complement 
of 39 staff this year, in addition to the Board 
Members. 

During the year the Board had 13 Technical 
Staff, who served as case managers and analysts 
for OEB proceedings. They participated in hearings 
as a separate party, completing the public record 
and providing a preferred alternative on the 
issues. Three Board Advisors offered technical, 
financial and accounting support and advice to 



the Board Members. These advisors were not a 
party in the hearings and assisted the Board 
panel throughout the hearing and decision-making 
process. During the year these roles were 
reviewed and revised. 

The Board's Energy Returns Officer (ERO) 
monitored the financial performance of the gas 
utilities on an ongoing and confidential basis, 
and provided advice to the Board on financial, 
technical, accounting and other matters. 

The Board Secretary and staff ensured that 
the logistics of hearings proceeded smoothly 
and served as the custodians of all official Board 
records. 

The Board Solicitor provided legal advice to 
Board Members and staff and assumed respon- 
sibility for the cost awards function and process, 
while Board Counsel represented Technical 
Staff in the hearings process. 

The Administrative Support Group provided 
office management, financial, human resources, 
secretarial and information systems support 



Ontario Energy Board 



VICE CHAIR 
G A Donnny 



M C Rounding 



DIRECTOR TECHNICAL OPERATIONS 
EA Mills 



SENIOR 

PROJECT 

MANAGER 

M.D McLeod 



PROJECT 

COORDINATOR 

EW Sweet 

(Vacant) 



ASSISTANT 

PROJECT 

COORDINATOR 

(Vacant) 



SENIOR 
PROJECT 
MANAGER 
A.P. Barrett 



PROJECT 

COORDINATOR 

MC Garner 

P Tolton 



ASSISTANT 

PROJECT 

COORDINATOR 

H Desal 



zl. 



SENIOR 
PROJECT 
MANAGER 
B. H 



(A) 



PROJECT 

MANGER 

ENGINEERING 

C J Mackle 



PROJECT 

MANAGER 

ENVIRONMENTAL 

N J McKay 



PROJECT 
COORDINATOR 



BOARD 
SECRETARY 
PB Pudge 



ASSISTANT 

BOARD 
SECRETARY 
PH. O'Dell 



HEARINGS 
ASSISTANT 
J F Sakauye 



FILE & 
INFORMATION 

CLERK 
A. Macatangay 



SECRETARY 
Ft. Chiasson 



HEARINGS 

OFFICER 

J E Byrnes (A) 



Notes: 

(A) Acting 

(*) C B Mathis' Home Position 

(*) B. Hewson's Home Position 

March 31, 1997 



10 



services. 



SECRETARY TO THE CHAIR 
H K Wong (A) 



BOARD 
MEMBERS 

FULL TIME 
PW Hjrdie 

EJ Robertson 
P V.ahos 

HG Morrison 
R M Higg.n 

PART TIME 
FA Drozd 
J B Simon 
C Elwell 



ADMINISTRATIVE 
MANAGER 
P Lamba 



3Z 



SECRETARIES 
N E Woodall 
ME Connor 
H. Wadden 
P Murtagh 
(Vacant) 



ZC 



RECEPTIONIST 
F Lafond 



ZL 



ENERGY RETURNS 

OFFICER/DIRECTOR 

OF FINANCE & 

ADMINISTRATION 

R A Cappadocia 



DEPUTY 
ENERGY 
RETURNS 
OFFICER 
A M Parekh 
(Vacant) 



MANAGER FINANCE 

& INFORMATION 

TECHNOLOGY 

A.F Meddows Taylor 



TEAM LEADER 

I T & OPERATIONS 

C Mathis (A) 



SENIOR SYSTEMS 
ANALYST 



PROGRAMMER/ 
ANALYST 

T Tran 



OFFICE SYSTEMS 

ANALYST 

G Mayer Powell 



FINANCIAL 

ASSISTANT 

S Lila 



FINANCE 

& ADMIN 

CLERK 

D.R Jess 



nz 



MANAGER 

OPERATIONAL 

PLANNING 

G A Brown 



BOARD 
COUNSEL 
J A Lea 

BOARD 
SOLICITOR 
S McCann 



SENIOR 

BOARD 

ADVISOR 

D B Matthew 



BOARD 
ADVISOR 
R L Pugh 



HEARINGS 

SUPPORT 

ANALYST 

R K Davidson 



LIBRARIAN 

L Bnrcilli 



Financial Report 

As a provincial agency, the Board is subject to the 
financial and administrative policies established by 
Management Board of Cabinet and the Minister of 
Finance. The Ontario Energy Board Act authorizes 
the Board to recover its costs by assessing costs 
against applicants, usually the utilities involved in 
hearings and related activities. 

Following a hearing, the Board issues an invoice to 
the applicant concerned. The amount to be paid 



includes the Board's out-of-pocket and direct 
expenses attributable to the specific hearing, 
as well as a contribution toward the Board's 
fixed costs, including overhead and payroll. 

The OEB recovers 100 per cent of its costs from 
the various applicants. This means the full cost of 
the Board's operations is recouped annually from 
the natural gas companies and Ontario Hydro, with 
no financial burden on the Ontario taxpayers. 



OEB Spending Analysis 1996-1997 



Standard Account 



Estimates 



Approved' 1 ' 
Budget 



Actual 
Expenditures 



Salaries and Wages 


$2,851,900 


Employee Benefits 


358,800 


Transportation & 




Communications 


124,400 


Services 


1,232,700 


Supplies & Equipment 


130,100 



$2,699,000 
300,000 

124,400 

1,175,500 

130,100 



$2,683,424 
372,336 

122,728 

788,778 
280,747 



TOTAL 



$4,697,900 



$4,429,000 



$4,248,013 



Notes: (n Budgetary reductions due to in-year Ministry expenditure control measures. 



y 
\ 



ii 






An Evolving Energy 
Marketplace 



The distribution 
of gas involves an 
extensive network 
of pipelines and 
storage facilities 
requiring sub- 
stantial capital 
investments. 



Natural gas supplies about 32 per cent of 
Ontario's end-use energy needs. It is the leading 
energy source for Ontario industry, accounting 
for 39 per cent of industrial energy demand. Gas 
also supplies 58 per cent of residential energy 
and 49 per cent of energy in the commercial/ 
institutional sector. 

Electricity supplies a further 18 per cent of 
Ontario's energy demand. Its uses range from 
lighting and heating, to powering information 
technology, to fueling industries like automobile 
manufacturing, pulp and paper and mining. 

The balance of Ontario's energy requirements are 
met by oil, coal, wood and natural gas liquids, such 
as propane. 

Natural Gas Sales 
and Distribution 

Ontario obtains some 93 per cent of its gas 
supplies from the western Canadian provinces 
through the TransCanada PipeLines Limited (TCPL) 
and related systems. The province also imports 
about 5 per cent from the United States and 
produces approximately 2 per cent itself. 

In Ontario local gas utilities pass the cost of gas 

through to the customer without markup. The com- 
modity cost of gas accounts for 25 to 30 per cent 
of the price paid by a typical residential end 
user. About 1 5 per cent of the rate covers the 
transportation cost to Ontario, while the balance 
of 55 to 60 per cent covers the distribution and 
operating costs of the local utility. 



Ontario has more than half of Canadian gas 
storage capacity. The main storage sites are 
developed from depleted natural gas fields in 
southwestern Ontario. These storage reservoirs 
are filled during the summer when demand for gas 
is low, and drawn down in winter when demand is 
high. The use of storage makes for an efficient 
system with lower costs to customers. 

Local Distribution Companies (LDCs) 

The distribution of gas involves an extensive net- 
work of pipelines and storage facilities requiring 
substantial capital investments. A monopoly 
arrangement is used to avoid costly duplication 
of facilities. Almost all natural gas in Ontario is 
distributed by four utilities holding franchises and 
certificates to transport gas in specific areas of 
the province. 

The Consumers' Gas Company Ltd. 

(Consumers Gas) is Canada's largest natural gas 
distribution utility, serving approximately 1 .3 million 
customers in central and eastern Ontario including 
the Greater Toronto Area, the Niagara Peninsula, 
Ottawa and many other communities. It also 
provides a wholesale service to gas distribution 
companies outside its franchise area. Consumers 
Gas is a wholly-owned subsidiary company of 
IPL Energy Inc. (formerly Interprovincial Pipeline 
System Inc.) 

Union Gas Limited (Union) is the second- 
largest gas distributor in the province and serves 
approximately 774,000 customers in southwestern 
Ontario. It also operates a network of transmission, 









storage, and compression facilities for customers 
and other utilities in eastern Ontario, Quebec and 
the United States. Union is owned by Westcoast 
Energy Inc. 

Centra Gas Ontario Inc. (Centra) reaches 
some 254,000 customers in northern, central and 
eastern Ontario. The Centra network is composed 
of a number of lateral pipelines running off the 
TCPL system, starting at Kenora and extending 
to Lake Ontario and the St. Lawrence River. It is 
also owned by Westcoast Energy Inc. 



Where gas is purchased directly from the producer, 
the buyer has to make transportation arrangements 
to carry the gas to its destination in Ontario. One 
option is T-service, used extensively by large- 
volume customers. The user purchases and takes 
title to gas outside Ontario and has it transported 
via TCPL and the LDC to the burner tip. 

A second option is known as buy-sell. It 

enables small gas users to participate in the 
direct purchase market, chiefly through purchasing 
groups organized by brokers and agents. 



In March 1997 the Board recommended that the 
LGIC approve the proposed amalgamation of 
Union and Centra, which was to take effect 
no later than January 1 , 1998. 

Natural Resource Gas Limited (NRG) is 
a privately-owned utility serving about 4,000 
customers in the Aylmer area. 

The Board regulates the rates charged by these 
four companies. In addition, Ontario has five 
small gas companies that are exempt from rate 
regulation under the OEB Act, and two municipally- 
owned gas utilities that are not regulated by 
the Board. 

Natural Gas Market Deregulated 

Since 1985 the Canadian natural gas industry 
has evolved into a more competitive, deregulated 
market. Consumers can now purchase gas from 
producers directly or through an agent, marketer 
or broker, and negotiate their own prices. This 
supply alternative is known as direct purchase. 
Customers still have the choice of purchasing gas 
from their local gas utility. 



In a typical arrangement, the broker buys gas 
from producers and sells it to the LDC in western 
Canada or at the Ontario border at a reference 
price approved by the OEB. The buy-sell reference 
price is based on the utility's weighted average 
cost of gas. The gas becomes part of the utility's 
system supplies and the customer pays the LDC's 
regular retail rate for gas consumed at the burner 
tip. The customer usually receives a rebate, 
generally representing a portion of the difference 
between the price paid to the producer and the 
buy-sell reference price paid by the LDC. 

In 1996-97 a third direct purchase option was 
approved by the OEB — agency billing and 
collection (ABC) T-service. This service 
enables brokers to bill their customers directly 
through the LDC for the gas supply costs. Under 
this arrangement, the name of the broker and the 
gas supply charges appear on the customer's 
monthly utility bill. The gas supply charges are 
collected by the LDC on behalf of the broker. 
The price a customer pays for gas has no defined 
relationship to the regulated price of gas. 




13 



At the end of calendar year 1996, the three major 
utilities had approximately 671 ,000 direct purchase 
customers — representing 29 per cent of total 
customers and including 592,000 residential cus- 
tomers. Direct purchase accounted for 69 per cent 
of total gas volumes delivered in Ontario — 
representing 30 per cent of residential volumes, 
66 per cent of commercial volumes and more than 
90 per cent of industrial volumes. During 1996-97 
Consumers Gas established a marketing affiliate, 
joining the Union affiliate established earlier, 
to compete head-on with brokers in the direct 
purchase market. 

A Direct Purchase Industry Committee 

(DPIC), formed with the OEB's encouragement, 
brings together representatives of agencies, 
brokers, marketers, consumers, industrial users 
and utilities to foster the development of a 
more competitive market, improve operation 
of the market and establish customer 
protection measures. 

Continental Gas Market Emerging 

The North American gas market is becoming 
increasingly open. Construction of more connec- 
tions with U.S. pipelines is expanding access 
to U.S. gas and providing alternate routes for 
shipping western Canadian gas to eastern markets. 
Hubs where gas can be traded and picked up are 
emerging across the continent. 

To capitalize on new opportunities, several major 
pipeline operators, local distribution companies 
and marketers in Canada and the United States 
are partnering to create a new west-to-east 
transportation link. Canadian participants 
include TCPL, IPL Energy Inc. and Westcoast 
Energy Inc. Four pipeline projects are involved — 
running from Alberta to Manitoba, then to the 



Chicago area, next to Dawn, Ontario and finally 
from Dawn to New York City. Subject to regula- 
tory approval, the individual projects that will forge 
the new west-to-east link are projected to begin 
service in late 1999. 

New Corporate Strategies 

While the gas supply market is evolving, the utili- 
ties are diversifying. Ontario gas companies are 
becoming active in fields ranging from municipal 
waterworks pipeline construction to the reading of 
water and electricity meters. The OEB addressed 
the regulatory implications of this development in 
its Report on Utility Diversification released this 
year. The Board concluded that utility diversifica- 
tion into non-regulated businesses should not be 
prohibited, provided that ratepayers are expected 
to benefit or, at a minimum, are protected against 
adverse consequences. 

In the United States the merger of utilities is a 
pronounced trend, one that has appeared in 
Ontario with the pending amalgamation of 
Union and Centra, approved by the government 
following an OEB hearing in 1996-97. 

Regulatory Framework Under Review 

In response to a dynamic gas market environment, 
the Board in 1995-96 commenced a 10-Year 
Market Review to examine the changes 
necessary in the regulatory framework to 
accommodate a more competitive natural gas 
market in Ontario. The review initially took a work- 
shop format, followed by creation of a working 
group with industry, customer and public interest 
group representatives scheduled to report to 
the Board in the spring of 1997. A key issue 
in the ongoing review is the separation of the 
merchant function from the LDCs' transportation/ 
distribution function. 







Electricity Generation, Sales and Distribution 

Ontario Hydro (Hydro), a provincially owned 
corporation, generates and transmits most of 
the electricity in Ontario. Hydro was created by 
provincial statute in 1906 and operates today 
under the Power Corporation Act. 

Hydro's system includes 29,000 kilometres of 
transmission lines and 109,000 kilometres of 
distribution lines, as well as 69 hydroelectric 
stations, five nuclear stations and six operating 
fossil-fuelled stations. The generation breakdown 
among these stations in calendar 1996 was: 
54 per cent nuclear, 26 per cent hydroelectric, 
13 per cent fossil and 7 per cent from other 
sources, such as independent power producers. 

Hydro sells power wholesale to 306 municipal 
utilities, who resell it to more than 2.9 million 
residential and business customers. Hydro also 
sells directly to almost 1 million retail customers 
including 103 large industrial users. 

Electricity Market in Flux 

The Advisory Committee on Competition 
in Ontario's Electricity System released its 
report in June 1996. The committee called for an 



end to Ontario Hydro's monopoly over electricity 
generation and transmission and the introduction 
of competition among power generators, 
who would have open access to the provincial 
transmission system. 

The report recommends separating Hydro's 
nuclear, hydroelectric and fossil fuel facilities 
and requiring them to compete as commercial 
businesses in a competitive market in which all 
producers — including out-of-province suppliers — 
could compete for electricity sales to customers. 
At the same time, responsibility for maintaining 
and managing Hydro's transmission assets 
would be moved to an independent transmission 
grid company. 

The committee proposed introducing competition 
first in the wholesale electricity market, which 
would affect power sales to municipal utilities and 
large industrial power users. Ultimately, the report 
recommends that Ontario should move to adopt 
full retail competition in electricity. 

The government's response to the report was 
awaited as the fiscal year ended. 



15 






Streamlining Regulation 
and Operations 



The OEB's 

Strategic Plan 
adopted in 1995 
recognizes 
electronic filing 
as a key opportu- 
nity to streamline 
the regulatory 

PROCESS. 



Competitive trends in the energy marketplace are 
lending impetus to new approaches to regulation. 
In response, the OEB is working with stakeholders 
to alter the way it does business and move 
towards more streamlined, light-handed regulation. 

Reorganization Gets 
Green Light 

OEB senior management decided to launch an 
internal Restructuring Initiative to utilize the Board's 
resources as efficiently and effectively as possible, 
position the Board to respond to changing 
regulatory roles, solidify core competencies, 
and advance the OEB's Mission and Vision of 
being recognized as in the forefront of utility 
regulation in Canada. 

The Board also decided that there would be a shift 
from the OEB's traditional two-staff model to a 
one-staff model, so that there would not be 
an unnecessary duplication of effort and Hearing 
Panels would be provided with appropriate support. 
The one-staff approach calls for the formation 
of project teams for each case, comprising the 
Hearing Panel Members, Technical Staff and 
a Case Administrator providing administrative 
support. No longer parties to the proceeding, 
Technical Staff will work with Board Members 
throughout the case. 

The restructuring project team identified the objec- 
tives, assumptions and functions for a restructured 
organization; held interviews with internal person- 
nel and senior officials of other commissions; and 
reviewed relevant organizational models. The 



Restructuring Report was submitted to the Chair 
in late December, and a new organizational model 
was approved by the Chair in February and the 
Deputy Minister of Environment and Energy in 
March 1997. Implementation began immediately 
and will be completed in 1997-98. 

Key directions arising from the Restructuring 
Report for the OEB's reorganization include: 

• strengthening of the audit and monitoring 
capability in anticipation of utility diversification, 
which will require new regulatory controls; 

• creation of a research and policy development 
function to respond to increasing expectations 
for the Board to shape regulatory policy; 

• establishment of a single unit to focus the 
processing of all applications to the Board; and 

• establishment of the corporate services area to 
consolidate the Board Secretary, information 
technology and operations, business services 
and planning and legal services areas. 

Electronic 
Regulatory Filing 
Moves Ahead 

The OEB's Strategic Plan adopted in 1995 
recognizes electronic filing as a key opportunity 
to streamline the regulatory process. The OEB 
has joined with the National Energy Board to 
launch an Electronic Regulatory Filing (ERF) Project 
to meet the needs of the two Boards and their 
stakeholders. 



16 






The first phase of the project, referred to as 
Information Architecture Design & Development 
(IADD), began in January 1996. This phase 
consists of analysis and design work for both 
jurisdictions, a detailed Cost Benefit Analysis and 
a limited implementation as a Proof of Concept. 
Ultimately, ERF will enable all regulatory documents 
to be efficiently and securely searched, accessed, 
submitted and exchanged among all regulatory 
participants, using whatever form of electronic 
transmission is appropriate, including the Internet, 
without regard to the original program used to 
prepare the data. 

During 1996-97 the Cost-Benefit Analysis 

(CBA) was completed, involving a confidential 
survey of a cross-section of the regulatory 
community. The study concluded that the ERF 
system would pay for itself in approximately three 
years. Significant benefits are expected from 
paper savings (with the user printing only what is 
needed), shorter regulatory timeframes (due to 
faster document turnarounds) and potential quality 
improvements (due to easier research based on 
standard document formats). A further survey was 
planned for summer 1997 to confirm the initial 
CBA results. 

The project team also began the process of 
analyzing regulatory documents to define common 
structures, so documents can be readily used and 
exchanged on any type of computer. In addition, 
work is proceeding on security issues. For exam- 
ple, digital signatures may be used to authenticate 
documents so they can serve as the official, legal 
record. 

The IADD stage is due for completion in 
September 1997. At that time, the OEB will 
determine whether to proceed with full implemen- 
tation toward a fall 1998 target date for the 
Board's first electronic filing. 



Improving the Hearing 
Process 

A major strategic priority for the Board is to 
streamline the hearing process. A committee of 
OEB employees has furthered this objective by 
co-ordinating a series of procedural innovations 
such as the following: 

• The OEB continues to encourage settlement 
processes as a potential way of resolving 
rates and other issues more efficiently than 
through the traditional adversarial approach. 
Under the settlement concept, the parties 
meet prior to the main proceeding to clarify 
information, narrow issues and where possible 
reach a consensus. Any agreement among the 
parties is submitted to the Board for approval. 
The Board is in the process of further develop- 
ing its Settlement Guidelines — to address 
such issues as the roles of the various parties 
and the criteria the Board uses to review a 
settlement agreement — in consultation with 
stakeholders. 

• Another example of innovation is the increasing 
use of flexible formats such as workshops, 
consultatives and working groups to address 
policy issues, including the structure of the 
natural gas market and the diversification of 
natural gas utilities. In addition, the Board is 
invoking written hearings in straightforward 
matters, such as franchise renewals, as an 
alternative to time-consuming oral proceedings. 

• In a further effort to streamline regulation, the 
Board developed Draft Guidelines on a 
Formula-Based Return on Common 
Equity for Regulated Utilities and decided 
to test this approach in the Consumers Gas 
fiscal 1998 rates case. The use of a generic 
formula-based model for calculating the return 
on common equity for all utilities is expected 

to reduce the regulatory burden. 



17 



Amendment to OEB 
Act Proposed 

Bill 121 , the Red Tape Reduction Act (Ministry 
of Environment and Energy), 1997 proposes to 
amend section 1 9 of the Ontario Energy Board 
Act concerning the natural gas rate-making 
process. Introduced in the Legislature in 
February 1997, this measure is one of a 
number of bills designed to reduce red tape 
and create more efficiency in government. 
In tabling the Bill, the Honourable Norman 
Sterling, Minister of Environment and Energy, 
stated that it was intended to give "the OEB 
greater flexibility in setting rates for natural 
gas, resulting in a streamlined regulatory 
process". 

Bill 121 would amend section 19 of the 
Ontario Energy Board Act to permit the 
Board to use a different methodology for 
determining rates from the methodology 
currently set out in subsections (2) to (6) of 
section 19. Those subsections provide that 
the Board, in setting rates, must determine a 
rate base for the utility and then determine a 
reasonable rate of return on that rate base. 
These determinations require detailed findings 
of fact made on the evidence presented at a 
public hearing. 

If the amendment is enacted, the Board will 
have the ability, in appropriate circumstances, 
to adopt a more flexible approach to setting 
rates. A more flexible approach may allow the 
Board to modify its processes and to create 
incentives for the utilities to become more effi- 
cient. 

Bill 121 was still before the Legislature at the 
end of the fiscal year. 



The Public Hearing Process 



INITIATION 

• By application for rate increase or other 
approval 

• By reference from Lieutenant Governor in 
Council or Minister 

• On Board's own motion. 

NOTICE OF APPLICATION 

• To all interested parties and/or by publication. 

INTERVENTION 

• Notice of intent and reasons for participation 
in hearing by parties, known as interveners. 

PREHEARING DOCUMENTATION 

• Evidence filed by applicant prior to hearing 

• Intervenors can request more information and 
file their own evidence 

• Intervenors may be asked for more 
information. 

PRE-HEARING MEETINGS 

• Technical conferences to clarify the evidence 

• Issues meeting to propose to the Hearing 
Panel the issues to be covered 

• Settlement conferences to negotiate issues 
prior to hearing. 



HEARING OF EVIDENCE 

• Hearing Panel reviews settlement agreements 
proposed by parties and may approve or reject 
them 

• Witness panels presented by applicant and/or 
intervenors 

• Cross-examination by applicant and/or 
intervenors 

• Written or oral argument by each party. 



BOARD DECISION/REPORT 

• Summarizes issues and arguments 

• Makes findings or recommendations. 



BOARD ORDER 

• Binding direction to implement Board decision. 




Roles of Practice and 
Procedure Issued 

The procedures of the Board, as an administrative 
tribunal, are governed by the Statutory Powers 
Procedure Act. Amendments to this Act effective 
April 1, 1995 gave tribunals the power to establish 
their own rules of procedure. With input from 
stakeholders, the OEB updated the draft rules 
then in use and on February 1, 1997 issued its 
Rules of Practice and Procedure. 

The new rules recognize recent changes in 
regulatory practice, with more detailed guidance 
concerning settlement conferences and agree- 
ments and other pre-hearing procedures. They 
also introduce provisions for electronic and written 
hearings. The rules are available in both English 
and French, and will be updated on a regular basis 
as needed. 



Cost Awards Process 
to Change 

The updated rules also contain new provisions on 
cost awards, which the OEB — like some other 
tribunals — has jurisdiction to make at the conclu- 
sion of a proceeding. Since the OEB's activities 
can affect a variety of public and special interest 
groups, its proceedings attract a wide range of 
intervenors. Energy Probe, Pollution Probe, the 
Consumers' Association of Canada, the Ontario 
Federation of Agriculture, the Industrial Gas Users 
Association and the Ontario Native Alliance were 
among the dozens of parties to appear before the 
Board in 1996-97. 

At the end of the year, the Board was refining the 
criteria to be used in determining eligibility for and 
the level of cost awards. The Board planned to 
seek stakeholder input on these issues in 1997-98. 



Intervenor Cost Awards 1996-1997* 


Case Type 


Proceedings 
(#) 


Intervenor 

Cost Orders 

Issued 

(#) 


Amount 
Awarded 


Natural Gas Rates 

Diversification 

Ontario Hydro - Bulk Power Rates 


8 
1 
2 


41 
12 
15 


$926,573 
380,977 
603,589 


TOTAL 


11 


68 


$1,911,139 



*Refers to fiscal year in which cost award was issued. Hearings occurring in one fiscal year may not have cost 
awards issued until a subsequent fiscal year. 




19 






Advisory Committee 
Formed 

This year, the OEB established an External 
Advisory Committee to provide stakeholders 
with an opportunity to discuss regulatory and 
procedural issues informally, outside the hearing 
room. Chaired by the OEB Chair, the group 
includes representatives of the gas utilities, 
Ontario Hydro, brokers, marketers, consumers, 
environmental groups and industrial energy users. 
The Committee provided input on such initiatives 
as the Board's Rules of Practice and Procedure 
and the process to be followed in completing the 
10-Year Market Review and has proven to be an 
effective mechanism for enhancing communication 
between the Board and its stakeholders. 

Agency Reform 
Under Way 

In February 1997, the Government Task Force 
on Agencies, Boards and Commissions, chaired 
by MPP Bob Wood, submitted its Report on 
Restructuring Regulatory and Adjudicative 
Agencies. The Task Force, which reviewed 
79 agencies, recommended that the OEB be 
retained in its current form. 

In addition to recommendations concerning 
specific agencies, the Task Force proposed 
reforms across the regulatory sector to produce 
an administrative justice system that is more 
streamlined, responsive and efficient. An 



Agency Reform Commission, chaired by 
MPP Gary Guzzo, has been appointed to oversee 
a major government project to implement this 
reform agenda. 

The OEB Chair serves on the government-wide 
Working Group which is assisting the Agency 
Reform Commission to co-ordinate agency reform 
projects. OEB staff as well have contributed to the 
agency reform initiative. 

Performance 

Management 

Implemented 

During the Board's strategic planning process in 
1995, staff made clear that performance manage- 
ment is important to them. Hence a key initiative in 
the OEB's Strategic Plan is the implementation of 
an effective performance management system. 

The components of the performance management 
process are: the setting of mutually agreed objec- 
tives and measurable criteria for each employee, 
frequent communication between employee 
and supervisor, and an annual evaluation of 
performance, followed by the setting of new 
objectives and identification of training needs. 
In 1996-97 the OEB completed all steps in the 
process for all eligible employees. 



\/ 



20 



1996-97 Regulatory Agenda 



Highlights of some of the OEB's major proceed- 
ings and regulatory initiatives during the year are 
reported below. 

Ontario Hydro 
Hearing 

Review of Hydro's Proposed 1997 Rates 

(HR 241 

In April 1 996 the OEB received a Letter of 
Reference from the Minister of Environment and 
Energy requesting the Board to review and report 
on Hydro's proposal to change certain rates and 
introduce some new rate options as of January 1 , 
1997. Hydro confirmed that there would be no 
increase in average rates through the year 2000. 

The Minister requested the Board to focus on 
whether Hydro had ensured that fairness and 
equity were maintained for all customer classes 
and specifically to examine: 

• the impact of the rate proposals on Hydro's 
financial soundness, the reduction of Hydro's 
debt and the reliability and quality of service 
to all Ontario's electricity customers and 

• the appropriateness of the proposals with 
regard to generally accepted ratemaking 
principles. 

The hearing was held from mid-June through early 
July 1996, with the Board's Report submitted to 
the Minister at the end of August. 

The Board found that Hydro's rate proposals would 
not adversely affect the utility's financial soundness 
or debt reduction targets, nor would they have a 
material impact on reliability and quality of service. 



However, the Report noted that as Hydro's surplus 
capacity diminishes, reliability and quality of service 
issues will become increasingly important. 

In the Board's view, Hydro's documented rate- 
making principles did not significantly deviate from 
generally accepted ratemaking principles. However, 
the Report recommended ways in which Hydro's 
proposals could be made to better conform 
to generally accepted ratemaking principles, 
particularly with regard to simplicity, public accept- 
ability, fairness and avoidance of discrimination. 

The Board also examined the compatibility of 
Hydro's rate proposals with Hydro's status as a 
monopoly and with potential restructuring of 
the electricity industry. The Board considered it 
impractical and inappropriate for Hydro to be 
anticipating in its rate proposals the potential 
restructuring of the electricity industry at 
that time. 

Regarding standard rates, the Board accepted 
Hydro's proposal to change the peak period 
for demand charges from 7 AM - 1 1 PM to 
7 AM - 7 PM during June, July and August, 
as these changes were supported by system 
cost information. 

As to optional rates, the Board did not agree with 
Hydro's intention to negotiate and sign long-term 
contracts. The Board recommended that Hydro's 
rate contracts should not extend beyond three 
years, due to uncertainty about whether or how 
Hydro's monopoly will be continued, and in view 
of the expectation that Hydro's surplus capacity 
will disappear by 1999. 



The Board found 

that Hydro's Rate 

proposals would 

not adversely 

affect the 

utility's financial 

soundness. 



21 



/ / \ \ \ \ \ 



The Board recommended a revision of Hydro's 
review and approval process related to the Load 
Retention and Expansion Price option, in such a 
manner that the rates are seen to be transparent, 
fair and equitable and in the public interest. A 
moratorium on new applications and on further 
processing of current applications was urged 
until this revision is completed and reviewed in 
a public forum. 

The Board also believed that Hydro's proposed 
five-year Guaranteed Price imposed inappropriate 
risks on non-participants, and that the planned 
U.S. dollar price option involved unnecessary 
foreign exchange risks. In the Board's view these 
options should not be offered. 

The Report urged Hydro to phase out the Real 
Time Pricing I option — in which customers 
purchase electricity at hourly rates set a day ahead 
— as support for economic development and 
social policy initiatives should not be reflected in 
public utility rates. The Board also concluded that 
the Discount Demand Service — which offers a 
rate discount in exchange for the right to interrupt 
service — should be replaced with a menu of 
interruptible rates based on avoided costs. 

In addition, the Board found that Hydro's Surplus 
Power Price option, Real Time Pricing II experi- 
ment, menu of backup rates, and Capacity/Energy 
Contracting experiment should be continued, 
subject to some modifications. 

The Board observed that Hydro's proposal this 
year should have but did not deal with the 
following issues identified by the OEB last year: 
addressing stranded assets; the unbundling of 
rates to produce transparent cost-based rates 
that send effective signals to customers; and 
the effective public review of load retention 



applications. The Board recommended that Hydro 
not come forward with further rate proposals until 
it is able to deal in a meaningful way with these 
issues. 

Natural Gas Rates 
Hearings 

Consumers Gas: Main Rates Fiscal 1997 
[EBRO 4921 

In December 1995 Consumers Gas filed an 
application with the OEB for rate changes for the 
1997 fiscal year, commencing October 1, 1996. 
A settlement conference was held in April 1996 
followed by a hearing in May and June. The 
Board's Decision with Reasons was issued on 
September 10, 1996. 

The Board found an overall revenue deficiency of 
$1 .6 million, an amount revised to $3.5 million 
as a result of amendments to the Decision 
issued later in September. This compared with the 
$33.6 million gross revenue deficiency proposed 
by the Company and the $9 million deficiency 
proposed in the settlement agreement. 

The Board approved a return of 1 1 .5 per cent 
on a common equity component of 35 per cent, 
compared with the Company's requested 1 1 .875 
per cent return on common equity. Rate base 
was set at $2,831 .3 million. 

The Board generally approved the Company's 
proposals with regard to cost allocation, rate 
design and demand side management activities. 
The Board accepted the Company's commitment 
to provide the results of its review of all aspects of 
interruptible rate design at the next rates hearing. 
The Board also accepted the Company's proposal 
to offer Agency Billing and Collection (ABC) 
T-service, in which the local distribution company 



22 



/ / I \ \ \ 






bills and collects the costs of gas supplies to its 
direct purchase customers on behalf of the agent, 
broker or marketer, for a fee. 

An essential condition of the OEB's acceptance of 
this ABC service was the development of a Code 
of Conduct for those parties who propose to offer 
it. The Direct Purchase Industry Committee (DPIC) 
was given responsibility to produce the Code 
of Conduct, which would be required to include 
significant consumer protection measures. In 
addition, the Board required DPIC to produce for 
the Board's review a customer information package 
(CIP), to ensure that all ratepayers are aware 
of all available purchasing options and their 
consequences. (The Board approved the ABC 
Service Code of Conduct and CIP for Consumers 
Gas franchise areas in late February 1997.) 

The Board found that the proposals for ABC billing 
and collection may be initially instituted within the 
utility on an interim basis. The Board will review 
a comprehensive cost allocation study, to be 
presented at the next main rates case, to deter- 
mine whether ABC service should be classified 
as a non-utility service. 

The OEB approved the Company's proposal to 
offer purchasers located outside the Consumers 
Gas franchise area the use of utility assets in off- 
peak periods through transactional services. The 
Board made clear that the sale of these services 
— such as gas loans, storage service and 
transportation entitlements — must not result in 
increased gas costs to ratepayers. At the same 
time, the Board denied the Company's forecast 
operating costs for the electronic gas trading 
board, as the Board was not convinced that the 
potential benefits of this service justified continua- 
tion of this initiative. 



The Board also approved the Company's proposed 
increases in the fixed monthly service charge to 
$7 from $6.75 for residential customers and to 
$12 from $10 for non-residential customers where 
a large volume contract is not appropriate. The 
Board expressed concern about the lack of 
progress in improving the relationship between 
customer charges and underlying costs. It there- 
fore requested, at the next rates hearing, a 
proposed timetable of increases to fixed monthly 
customer charges, information as to the accept- 
ability of proposed increases, and a proposed 
program to provide information to the customers 
who may perceive unfairness in such increases. 

The OEB did not approve the Customer 
Information System (CIS) capital budget allocation 
of $20.6 million for fiscal 1997, part of the 
Company's Strategic Information Management 
(SIM) Plan. The Board had concerns about 
the integrity of the forecast and cost controls 
supporting the CIS. 

The Board issued a Rate Order at the end of 
September 1996. The new rates were effective 
October 1 , 1996, and were expected to be 
implemented by that date and in any case no 
later than the first billing cycle after October 31 . 
Any impact on customers due to the disposition 
of the balances in the various deferral accounts 
was to be incorporated as a one-time adjustment 
in the first billing for each customer following the 
date of implementation of the new rates. 

Consumers Gas: Rehearing 
CEBRO 492-OU 

In November 1996, the Board received an 
application from Consumers Gas to rehear certain 
aspects of the EBRO 492 ruling that dealt with 




the Customer Information System (CIS), a major 
component of the Company's Strategic Information 
Management (SIM) Plan. 



on Consumersfirst, a non-subsidiary marketing 
affiliate of Consumers Gas, established to provide 
natural gas direct purchase options. 



In a written Decision with Reasons issued in 
December, the Board determined that it would not 
hold a hearing to reconsider the decisions relating 
to CIS. The Company had not provided sufficient 
grounds for a rehearing in accordance with the 
Board's Rules of Practice and Procedure. The 
Board was of the view that the Company will be 
able to seek approval of all SIM costs, including 
the fiscal 1997 CIS costs previously disallowed, 
at its next main rates case. 

Consumers Gas: Gas Costs 
(EBRD 492-02] 

In January 1997, the Board received a Notice of 
Motion filed by Consumers Gas for an order 
varying the EBRO 492 Rate Order to reflect a 
change in the cost of gas. In a Decision with 
Reasons issued in February, the Board accepted 
the Company's proposal to reflect the higher costs 
in rates effective March 1, 1997. 

Consumers Gas: Main Rates Fiscal 1998 
(EBRO 4951 

In December 1 996 Consumers Gas filed a rate 
application for fiscal 1998, beginning October 1, 
1997. Technical and issues conferences and an 
Issues Day were held in February 1997 and the 
hearing was scheduled to begin in May. 

In March 1997 the Board issued a Procedural 
Order setting out the OEB's Draft Guidelines on 
a Formula-Based Return on Common Equity for 
Regulated Utilities, to be used in calculating the 
return on common equity for Consumers Gas. The 
order also required the Company to file evidence 



Union: Gas Costs 

[EBRO 486-04/486-04A3 

Union filed two motions in February 1996, one to 
vary the EBRO 486-03 Rate Order to reflect an 
increase in the Company's cost of gas and new 
TCPL tolls, and the other to request disposition of 
the forecast Purchased Gas Variance Account 
(PGVA) balance for fiscal 1996. The PGVA debit 
balance had been increased by additional costs 
for gas purchased due to unusually cold weather. 
A hearing was held in March 1996. 

In April 1996 the Board issued its Decision with 
Reasons and Rate Order. The Board approved an 
updated weighted average cost of gas effective 
January 1 , 1996 and on that basis determined that 
the PGVA debit balance for winter spot gas premium 
costs should be adjusted to $21 .631 million. 

The OEB expressed some reservations about the 
effectiveness of Union's gas supply planning 
process and determined that Union's implementa- 
tion of its gas supply plan was deficient. The Board 
determined that Union should have purchased a 
higher volume of gas for delivery in December 
1995 at the lower price. The Board, therefore, 
found that an amount of $5.14 million should be 
borne by the shareholders and directed that 
this amount be removed from the PGVA balance 
considered for disposition to customers. 

The Board also determined that the amount of 
$4,982 million associated with gas volume 
increases for Company use, unaccounted-for 
gas and heating value adjustment should remain 



24 









in the PGVA. The Board directed Union to bring 
forward a proposal in the next main rates hearing 
for disposition of this PGVA debit amount. The net 
PGVA balance approved by the Board for recovery 
at this time was $1 1 .509 million. 

In the Board's view all residential, industrial and 
commercial customers in rate classes M2, M4, M9 
and M10 — whether system customers, buy/sell 
customers or bundled-T customers — derived 
some benefit from Union's actions and should 
therefore contribute to the recovery of the PGVA 
debit balance of $1 1 .509 million. The allocation 
was to be based on the volumes consumed by 
customers in these rate classes for the period 
November 1, 1995 to March 31, 1996. The Board 
directed Union to collect the PGVA debit through a 
one-time charge to the affected customers, except 
for the large industrial M4 users from whom the 
allocation was to be recovered by a rate rider for 
the period May 1 , 1996 to April 30, 1997. 

In May 1996 the Board received a Notice of 
Motion from Union for a rehearing and review 
of the Board's decision relating to the disposition 
of Union's Purchased Gas Variance Account. In 
July 1996 the Board ruled that it would not rehear 
or review its original decision. 

Later in the month, the Board was served with 
a Notice of Motion from Union in which the 
Company sought leave from the Ontario Divisional 
Court to appeal the Board's Decision. In October 
1996 the Court dismissed Union's motion for leave 
to appeal, stating there was no denial of natural 
justice. In addition, the Court found that the 
Board's Decision could not be said to be so 
unreasonable that it amounted to an error of 
law. The Board's Decision stands. 



Centra/Union: Main Rates Fiscal 1997 
(EBRO 493/494/EBRLG 34-19/EBO 177-991 

In March 1996 Union and Centra (the Companies) 
each filed applications for approval of rates for the 
1997 fiscal year, beginning January 1 . In view of 
the common fiscal years and the shared services 
arrangements between the two utilities, the 
Companies asked the Board to deal with their 
applications together in a joint proceeding. 

Earlier, in February 1996, the Board had received 
an application for approval under the Companies' 
respective Undertakings for payments to 
Westcoast Energy Inc., the parent company, 
related to the provision of services to Union 
and Centra during 1996. In May the Board 
combined this application and the two rates 
applications in a single proceeding. 

The hearing was held in October and November 
1996, following completion of a settlement 
process. Subsequent to the hearing, both utilities 
sought and received approval for interim cost 
of gas changes effective January 1 , 1997 and 
March 1, 1997, respectively. 

In March 1997 the Board issued its Decisions with 
Reasons. For Union, the Board found a revenue 
excess of $29.5 million, compared to a claimed 
deficiency in the original filing of $42.5 million. 
This resulted in an overall decrease in the 1997 
rates then in place. Utility rate base was set at 
$2,214.2 million. The Board approved an 1 1 per 
cent rate of return on the shareholder's common 
equity representing 34 per cent of total capital, 
compared with Union's requested 12.75 per cent 
return on common equity and the 1 1 .5 per cent 
return recommended in the ADR settlement 
agreement. 




... the Court 
found that the 
Board's Decision 
cocjld not be said 
to be so unrea- 
sonable that it 
amounted to 
an error of law. 




25 



The Board also authorized the clearance of the 
1996 year-end balances in Union's deferral 
accounts related to the higher than forecast 
cost of gas in 1996 and other charges. Union 
was authorized to recover the deferral account 
balances, less the refund of the approved rate 
decreases for January through May 1997, through 
two monthly payments. 

For Centra, the Board found a revenue deficiency 
of $1 1 .7 million, compared to a claimed deficiency 
of $44.6 million in the original filing. This lowered 
the Company's overall increase in rates for 1997. 

Utility rate base was set at $786 million. The Board 
approved an 1 1 .25 per cent rate of return on a 
common equity component of 36 per cent, com- 
pared with Centra's requested 1 3 per cent return 
on common equity and the 1 1 .75 per cent return 
recommended in the ADR settlement agreement. 



The Board required the Companies to meet the 
conditions precedent in the Consumers Gas ABC 
T-service regarding customer education. In the 
Board's view the customer information package 
developed for the Consumers Gas franchise area 
was appropriate for use in the Centra and Union 
franchise areas, with some modifications. 

The Companies had proposed an increase in the 
cost and scope of services provided by the 
Westcoast Corporate Centre in Vancouver from 
$683,000 in 1995 to $5.2 million in each of 1996 
and 1997. The Board approved $2.26 million 
for each year based on the expected benefit to 
ratepayers. 

In addition, the Companies received approval 
of a new five-year combined Demand Side 
Management Plan, which corrected deficiencies 
the Board had found in Union's previous Plan. 



The Board also authorized the clearance of 
Centra's deferral accounts related to the higher 
than forecast cost of gas in 1996 and other 
charges. Centra was authorized to recover the 
actual deferral account balances and the approved 
rate increase amounts for January through May 
1997 through four equal monthly payments. 

The Board declined to approve a number of 
proposed changes to the Companies' direct 
purchase arrangements. The Board did authorize 
a change to Union's buy/sell pricing methodology 
for direct purchase to reflect only the avoided 
cost of firm supplies. It also approved a new 
ABC (Agency Billing and Collection) T-service to 
be offered by Union and Centra, allowing direct 
purchase agents to put their customers' costs 
of gas on the utility bill for a fee. 



NRG Main Rates Fiscal 1996 and 1997 
(EBRO 491] 

In August 1995 Natural Resource Gas Limited filed 
an application for approval of rates for its 1996 and 
1997 fiscal years commencing October 1, 1995 
and October 1 , 1996, respectively. A settlement 
conference took place in early January 1996, 
leading to an agreement on a wide range of issues. 
The hearing of the evidence was held in mid- 
January 1996. 

The Board released a Decision with Reasons in 
April 1996, finding a revenue sufficiency of 
$164,749 for fiscal 1996 and a further revenue 
sufficiency of $145,130 for fiscal 1997. A return 
on equity of 1 2.25 per cent was approved for each 
of the two fiscal years, compared with NRG's 
requested annual return on equity of 12.55 per 
cent. Rate base was set at $6,659,681 for fiscal 
1996 and $7.51 1,491 for fiscal 1997. 



26 






In line with the settlement agreement, the Board 
approved a two tier trigger mechanism for clearing 
the Purchased Gas Variance Account (PGVA). 
NRG is required to advise the Board when the 
forecast year-end PGVA balance exceeds $20 for 
a typical residential customer and further report 
when it exceeds $30. The reports are to include a 
recommendation from the Company regarding the 
disposal of the balance in the PGVA or an explana- 
tion of why disposal would be inappropriate. 

The Board accepted proposed changes to NRG's 
cost allocation methodology as well as the restruc- 
turing of rates in the various rate classes, with the 
exception of the inverted winter commodity rate 
for Rate 2 customers. 

Other Proceedings 

System Expansion 
CEBO 188) 

In July 1995, on its own motion, the Board issued 
a Notice of Public Hearing into matters relating 
to natural gas system expansion, including a 
consideration of demand-side options in supply- 
side planning by the three major utilities. Areas to 
be examined included: appropriate methodologies 
and standards for evaluation of economic feasi- 
bility; public interest considerations; profitability 
levels; types and levels of subsidy; consistency 
between demand-side and supply-side planning 
processes; and socioeconomic and environmental 
factors. 

As a result of a settlement conference in 
December 1995, the Board concluded that it 
needed first to determine the principles that 
should underlie a policy on distribution system 
expansion. In January 1996 the OEB called for 
written submissions on a series of issues and 
in August it released an Interim Report. This 



document contained decisions on issues of 
principle and directed the utilities to file draft 
system expansion guidelines and policies 
reflecting these findings. 

In the Interim Report the Board determined that 
a public utility does not have an obligation to 
serve without regard for the cost of providing 
the necessary infrastructure. The Board then 
considered the utilities' proposal to use a portfolio 
approach in analyzing the financial feasibility of 
distribution projects. Under this concept, each 
utility would group all of its new projects together 
and the utility's overall portfolio would be required 
to be financially self-sustaining. 

Observing that such an approach would be more 
consistent with the objectives of "light-handed" 
regulation, the Board found that grouping all of 
a utility's proposed distribution customers for a 
test year into one portfolio for the purpose of 
ascertaining the financial feasibility of serving them 
would provide the utilities with more flexibility in 
designing their delivery network and is in the public 
interest. The Board indicated that the profitability 
index (PI) of the proposed projects should be 
aggregated to calculate the overall portfolio PI. 

The Board noted that an overall rolling portfolio PI 
of 1 .0 means that existing customers will not incur 
a rate increase over the long term as a result of 
distribution system expansion. The Board was 
therefore of the view that an overall portfolio PI of 
1 .0 or better is in the public interest. The Board 
added it expects the utilities to develop common 
methods for determining whether or not each 
utility's portfolio of distribution system expansion 
projects is profitable, as well as common reporting 
requirements. 



27 



/ / 1 \ \ \ \ 



^wmw^m 



... CUSTOMERS 
WOULD RECEIVE A 
NET BEMEFIT 
FROM THE MERGING 
OF THE TWO 
COMPANIES... 



Finally, in order to demonstrate that system expan- 
sion continues to be in the public interest from an 
aggregate economic, social and environmental 
point of view, the Board will require the utilities 
to file the results of a societal cost test of their 
overall system expansion portfolios — a test 
that could include monetized, non-monetized and 
qualitative components. The Board requested 
the utilities to develop a common evaluation 
method for this purpose. 

In response to the Interim Report, the three major 
utilities filed a Common Submission and Guidelines 
in September 1996. After reviewing the comments 
of interested parties on this submission, the Board 
found that differences existed as to the common 
methods for the financial test to determine the 
feasibility of system expansion, the projects to 
be included in the utilities' portfolios, and how the 
performance of these portfolios is to be evaluated. 

A workshop on system expansion was held at the 
Board's offices in December 1996, and an ADR 
session to address outstanding issues regarding 
implementation of the Interim Report took place in 
late January and early February 1997. The Board 
received a settlement agreement in March 1997, 
followed by a statement of deficiencies in the 
settlement agreement, submitted by some of the 
parties. At year end, the Board was considering 
the settlement proposals to determine the next 
steps in the proceeding. 

Union/Centra: Amalgamation 
(EBO 1951 

In September 1996 the Board received an appli- 
cation from Westcoast Energy Inc. and its sub- 
sidiaries Union and Centra for leave to amalgamate 
the two utilities no later than January 1 , 1998. 



While one-time costs of $2.9 million were pro- 
jected to effect the amalgamation, the expected 
savings from administrative and operational 
efficiencies were estimated at $2.1 million on a 
yearly basis. 

The Board held a hearing in January 1997 and 
issued a report in March 1997. In assessing the 
application, the Board considered the impact on 
rates and services, shareholders and investors, 
employees and the communities the utilities 
served. The Board also weighed the regulatory 
implications and the general public interest. 

The OEB found that, overall, customers would 
receive a net benefit from the merging of the 
two companies, with no countervailing harm to 
any specific customer group or stakeholder. The 
Board was satisfied that any cost allocation or 
rate design concerns could be addressed in future 
rates proceedings. The Board found that the 
amalgamation proposal was in the public interest, 
and recommended LGIC approval, subject to 
revised Undertakings being effected. 

Consumers Gas: Utility Services 
[EBO 179-11] 

In January 1997, Consumers Gas filed an applica- 
tion for approval under the Undertakings of an 
affiliate transaction with Consumers Gas Energy 
Inc. (CGEI) relating to the Integrated Utility 
Services Project described below. CGEI is 
the parent company of Consumers Gas and is 
indirectly owned by IPL Energy Inc. through two 
subsidiary companies. 

The application requested approval for provision 
of billing services, meter reading and cashiering 
services — the Integrated Utility Services 



28 









Project — by a joint venture comprised of CGEI 
and TransAlta Energy Corporation. The joint 
venture was formed to enter into an agreement 
to provide services to Consumers Gas and 
St. Catharines Hydro Electric Commission. 

In February 1997, the Board granted interim 
approval of the application without a public hearing. 
The Board's interim approval is subject to the 
condition that the details of this agreement be 
reviewed in the Consumers Gas rates hearing 
(EBRO 495). 

Union: Landowner Compensation — 
Sombra Pool 
CEBO 184] 

An application was filed in January 1995 on behalf 
of landowners with property overlaying the Sombra 
Pool designated gas storage area in Lambton 
County in southwestern Ontario. The application 
requested the OEB to determine the compensation 
to be paid by Union to the landowners for the 
volume of gas remaining underground when Union, 
the operator of the storage facility, first injected 
gas into the pool. 

In September 1995 the Board decided that it would 
proceed to determine the purchase price of the 
residual gas, as there was not an agreement 
among the parties as to the appropriate price to be 
paid. Board Staff facilitated negotiations between 
the applicants and Union in April and May 1996. 
Several issues were resolved and a settlement 
agreement was filed. The hearing into the compen- 
sation to be paid to the landowners took place in 
March 1997, with argument due in April. 



Other Regulatory 
Matters 

Diversification Consultation 

In a December 1995 letter, the Minister of 
Environment and Energy requested the Board to 
advise her on the appropriate regulatory controls 
and designated business areas for diversification 
by Ontario natural gas utilities, to replace the 
current requirement in the utilities' Undertakings 
for prior OEB approval. The Minister also request- 
ed the Board to seek input from stakeholders on 
these issues. 

The letter indicated that, to allow Union and 
Consumers Gas to participate in the bidding 
process for the York Region water project, the 
Government had exempted the utilities from having 
to obtain prior OEB approval regarding their 
involvement, as required by the Undertakings. 
The exemption was subject to certain conditions to 
limit risk by restricting the level of the investment 
and confirming the OEB's power to monitor these 
investments. 

Late in January 1 996, the Board received a 
second letter from the Minister, which concerned 
a request from IPL Energy Inc. and Consumers 
Gas to make further changes to their Undertakings. 
Specifically, the Companies sought release from 
the requirement to maintain a minimum 15 per cent 
public float in Consumers Gas' common shares. 

The Board decided to hold a public forum to 
provide an open discussion on these issues. This 
was held on February 29 and March 1 , 1996. Final 
written submissions were received by March 20 
and distributed to all participants. The Board 



29 



submitted an Advisory Report to the Minister of 
Environment and Energy on Utility Diversification, 
released to the public in mid-May 1996. 

The OEB concluded that utility diversification into 
non-regulated businesses should not be prohibited, 
provided ratepayers are expected to benefit or, 
at a minimum, are protected against adverse 
consequences. The Board concluded that the 
risks to ratepayers could be significant and require 
appropriate structural and regulatory controls. 

The Report recommended the use of corporate 
structure to protect ratepayers by requiring 
corporate separation between the diversification 
activity and the utility. In the Board's view, the 
requirement for prior approval of diversification 
activities should be eliminated only for utility 
transactions conducted through non-subsidiary 
affiliates (that is, subsidiaries of the parent 
company rather than of the utility), subject to 
certain regulatory controls. The Board also 
recommended that diversification within a division 
or subsidiary of the utility itself or through a 
partnership or joint venture should be permitted, 
subject to prior approval. 

To augment structural controls, the Report called 
for a number of regulatory controls. In general, 
the Board believed that limiting diversification to 
specific designated business areas which rely on 
the utility's core business should limit ratepayer 
risks to a degree. The Board recommended that an 
investment cap should be placed on all financial 
support arrangements provided by the utilities. 
The overall cap should be set in the range of 
30 to 35 per cent of the utility's equity, with a 
10 per cent cap on individual projects. 



The Board noted that monitoring and auditing will 
be increasingly important to the performance of its 
mandate, and recommended that reporting and dis- 
closure guidelines be developed with respect to 
utilities' participation in ventures outside their regu- 
lated business. The Report also indicated that the 
added cost of reporting and monitoring should not 
be borne by the ratepayer, and recommended con- 
firmation of the Energy Returns Officer's authority 
to obtain information necessary to assist the Board 
in carrying out its responsibilities under the 
Undertakings. 

The Report recommended that the utilities and 
their parents undertake to protect the ratepayer 
or hold the ratepayer harmless as a result of any 
diversification activity. The Report further con- 
cluded that all the utilities should have a committee 
of independent directors to review affiliate transac- 
tions and therefore proposed that the Undertakings 
of Consumers Gas be amended to create such a 
committee. 

The Board also found that the elimination of the 
public float for Consumers Gas is acceptable 
since the remaining benefits are modest and 
can be foregone without adversely impacting 
ratepayers or the public interest. 

10-Year Market Review 

The OEB determined that, after 10 years of dereg- 
ulation, a review of the current natural gas market 
structure in Ontario would be appropriate. The 
Board decided to hold two workshops on this 
issue, featuring presentations from the various 
players in the natural gas industry followed by open 
discussion, in December 1995 and January 1996. 



30 



\/ 



I 






To ensure a broad range of perspectives, the 
Board invited gas customers, agents, brokers, 
marketers, local distribution companies, producers, 
public interest groups and other Canadian regula- 
tors to participate. 

In late September 1 996, the Board released its 
10- Year Market Review Report to industry partici- 
pants and stakeholders. The Report concluded that 
a more competitive natural gas commodity market 
has the potential to improve customer choice 
and market efficiency while reducing the need for 
regulation. The Board agreed with the majority 
of workshop participants that the legislative 
restrictions on end-use gas sales should be 
removed or modified to allow unregulated gas 
sales by non-LDC suppliers and Ontario producers 
anywhere in the province. 

The Board also concluded that it cannot consider 
removal of the regulated utility supply option with- 
out being satisfied that all customer groups will be 
adequately protected and that most customers 
want this change. The Board therefore was not 
prepared at that point to determine how fast and 
to what extent the transition to a fully competitive 
market should occur. The Board found that before 
the gas commodity market can be fully deregu- 
lated, small volume customers need to be better 
educated about the risks and benefits of different 
supply options. 



utilities and their marketing affiliates established to 
provide direct purchase options. The utilities them- 
selves should be limited to providing a standard 
gas supply service during the market transition. 

The Board decided to continue the Market Review 
through a stakeholder Working Group that would 
work to identify issues requiring further study and 
analysis and propose solutions or narrow the 
issues. The Working Group was formed in October 
1996. A report summarizing its review of the 
Ontario natural gas market was expected by the 
spring of 1997. 

Pipeline Applications 

Consumers Gas: 
Rockland/Clarence/Cumberland 
CEBLO 255] 

In November 1995, the Board received an applica- 
tion requesting leave to construct a natural gas 
transmission pipeline to the Town of Rockland, 
the Township of Clarence and the Township of 
Cumberland east of Ottawa. 

A hearing was held in April 1996. Noting the 
evidence on economic feasibility, environmental 
conditions and the overall public interest, the 
Board in an Oral Decision found the application to 
be in the public interest and approved the project 
subject to certain conditions. 



Some participants expressed concern about the 
potential for marketing affiliates of the utilities to 
gain preferential access to monopoly services and 
customer information. The Board concluded that a 
Code of Conduct should be developed to describe 
the appropriate operating rules between the 



Consumers Gas: Orangeville Reinforcement 
(EBLO 2561 

In March 1996, the Board received an application 
from Consumers Gas for leave to construct a 
natural gas transmission pipeline to reinforce the 



31 



/ \v 



X 



distribution system serving the Town of Orangeville 
and the surrounding areas and to enable further 
expansion in the area. Consumers Gas also 
proposed to construct two pressure regulator 
stations and related facilities. 

A hearing was held in June 1996 and the Board 
issued an Oral Decision in early July approving 
the Orangeville reinforcement line and ancillary 
facilities subject to certain conditions. 

Consumers Gas: Coveny and Black Creek Pools 
CEBLO 2581 

In October 1996, the Board received an application 
from Consumers Gas for construction of 13 km of 
transmission pipeline and gathering lines relating to 
the development of the Coveny and Black Creek 
storage pools in the Township of Sombra in 
Lambton County. A hearing was held in February 
1997. The Board's decision on the pipeline 
proposal was pending at year end. 

Consumers Gas: Perth Reinforcement Project 
[EBLO 260) 

Consumers Gas filed a leave-to-construct applica- 
tion in February 1997 for the Perth Reinforcement 
Project consisting of approximately 16.8 km of 
transmission line from the existing Consumers Gas 
West Valley line near Smiths Falls to the Perth 
District Station. The objective is to reinforce the 
West Valley distribution system, which extends 
from Brockville in the south to Petawawa in the 
north and supplies major centres such as Smiths 
Falls, Perth, Carleton Place, Almonte, Pakenham, 
Arnprior, Renfrew and Pembroke. The proposed 
project will also allow Consumers Gas to supply 
the community of Port Elmsley and Steep Rock 
Resources Ltd. located west of the Town of Perth. 
The hearing was scheduled for June 1997. 



Consumers Gas: Creemore/New 
Lowell/Sunnidale Expansion Project 
[EBLO 261) 

In February 1 997 the Board received an application 
from Consumers Gas to construct a 23.4 km natural 
gas transmission pipeline in the Township of 
Clearview in the County of Simcoe, to expand 
service to the communities of Creemore, New 
Lowell and Sunnidale and other customers along 
the pipeline route. The case was pending at 
year end. 

Union: Bright to Owen Sound 
[EBLO 251) 

Union applied in December 1994 for leave to 
construct a section of 48-inch pipeline from its 
Bright Compressor Station in the Township of 
Blandford-Blenheim (southwest of Waterloo) to the 
existing Owen Sound Valve Site in the Township 
of North Dumfries. The project was subsequently 
delayed due to changes in transportation require- 
ments on Union's Dawn Trafalgar system. The 
hearing was held in February and March 1996, and 
the OEB's Decision with Reasons was issued in 
early May. 

The Board found that the need for the Bright to 
Owen Sound Line was dependent on the require- 
ments of a single company, Gaz Metropolitan, inc. 
(GMi). The Board gave the utility until June 1 , 
1996 to file supplementary evidence in support of 
GMi's intention to utilize its contracted capacity 
with Union. Union filed supplemental evidence in 
support of its case in late May and the hearing 
reconvened in mid-June. 

In early July 1996, the Board issued an Addendum 
to Decision with Reasons. The Board noted that, 
as a condition of the Order, Union would be 
required to report to the Board an update of the 







peak day volume forecasts in each rate case for 
the next 30 years and satisfy other conditions, due 
to the uncertainty surrounding requirements in 
years subsequent to the extension of the GMi 
contracts. In addition, for the purposes of planning 
for future expansions on the Dawn Trafalgar 
system, Union was required to immediately 
establish a queuing policy similar to that used by 
TCPL and present it to the Board at the earliest 
opportunity. 

Union: Enniskillen/Dawn 
(EBLO 257] 

In July 1996, the Board received an application 
from Union for leave to construct various sections 
of natural gas pipeline in the Township of 
Enniskillen and in the Township of Dawn, in 
Lambton County. The hearing was held in October 



and the Board issued a Decision in November 
1996, finding the application to be in the public 
interest and approving the project subject to 
certain conditions. 

Union: Port Elgin-Wiarton Project 
[EBLO 259] 

In December 1996 the Board issued Notices of 
Applications by Union to construct natural gas 
pipelines and ancillary facilities to serve the Towns 
of Port Elgin, Wiarton and Southampton, the 
Villages of Tara, Hepworth and Shallow Lake 
and the Townships of Arran, Saugeen, Amabel, 
Sydenham, Derby and Keppel. The hearing was 
scheduled to begin in early April 1997 in Port Elgin. 



33 



.1st of Proceedings 



The following is a tabular listing of all proceedings 
arising from applications and references received 
or initiated by the Board during the fiscal year 



ended March 31 , 1997. Also listed are proceed- 
ings arising in earlier years and dealt with by the 
Board in the 1996-97 fiscal year. 



CASE 


FILE 


APPLICANT 


CASE DESCRIPTION 


DECISION/ORDER 


TYPE 


NUMBER 






ISSUED 


Reference From the 


Minister of Environment and Energy Regarding Ontario Hydro 


HR 


24 


Ontario Hydro 


Review and Report on Ontario 
Hydro's Submission on 1997 
Electricity Prices 


Aug. 30/96 


Natural Gas Rates Applications 






EBRO 


486-04 


Union 


Gas Costs 


Apr. 1 2/96 & 

May 7/96 - Addendum 


EBRO 


486-04A 


Union 


Gas Costs (Vary Order) 


Apr. 12/96/May 10/96 
& July 10/96 


EBRO 


489-04 


Centra 


Gas Supply Rates 


June 25/96 & 
July 10/96 


EBRO 


491 


NRG 


Main Rates Fiscal 1996& 1997 


Apr. 1 9/96 & 

May 8/96 - Addendum 


EBRO 


491-01 


NRG 


Amendments to Rate 3 Schedule 


In Progress 


EBRO 


492 


Consumers Gas 


Main Rates Fiscal 1997 


Sept. 10/96 & Sept. 10 
& 27/96 - Addendum 


EBRO 


492-01 


Consumers Gas 


Rehearing of CIS Issues 


Dec. 3/96 


EBRO 


492-02 


Consumers Gas 


Gas Cost Motion 


Feb. 28/97 


EBRO 


493 


Centra 


Main Rates Fiscal 1997 


Mar. 25/97 


EBRO 


493-01 


Centra 


Interim Order (Rates) 


Dec. 24/96 


EBRO 


493-02 


Centra 


Quarterly Rate Review (Gas Costs) 


Feb. 17/97 


EBRO 


494 


Union 


Main Rates Fiscal 1997 


Mar. 25/97 


EBRO 


494-01 


Union 


Interim Order (Rates) 


Dec. 24/96 


EBRO 


494-02 


Union 


Gas Cost Motion 


Feb. 17/97 


EBRO 


495 


Consumers Gas 


Main Rates Fiscal 1998 


In Progress 



Pipeline Construction 

EBLO 251 

EBLO 255 

EBLO 256 

EBLO 257 

EBLO 258 



Union 

Consumers Gas 
Consumers Gas 
Union 
Consumers Gas 



Bright to Owen Sound 

Town of Rockland 

Orangeville Reinforcement Project 

Bentpath/Rosedale Pool 

Black Creek and Coveny Pools 



May 3/96 & July 2/96 

Apr. 18/96 

July 4/96 

Nov. 5/96 & Nov. 1 8/96 

In Progress 



34 



\L 







CASE 


FILE 


APPLICANT 


CASE DESCRIPTION 


DECISION/ORDER 


TYPE 


NUMBER 






ISSUED 


EBLO 


259 


Union Gas 


Village of Wiarton, Town of 
Southampton, Township of Saugeen 


In Progress 


EBLO 


260 


Consumers Gas 


Perth Reinforcement Project 


In Progress 


EBLO 


261 


Consumers Gas 


Township of Clearview 


In Progress 


Franchi 


se Renewals 








EBA 


724 


Union 


Reg. Mun. of Hamilton-Wentworth 


Dec. 16/96 & Jan. 16/97 


EBA 


725 


Union 


Town of Belle River 


May 14/96 


EBA 


726 


Centra 


Township of Hillier 


July 4/96 


EBA 


729 


Union 


Township of Sombra 


May 1 4/96 


EBA 


731 


Centra 


Township of Atikokan 


Sept. 16/96 


EBA 


732 


Union 


Village of Dutton 


May 14/96 


EBA 


738 


Centra 


Town of Huntsville 


May 7/96 


EBA 


739 


Centra 


Town of Powassan 


Apr. 11/96 


EBA 


740 


Union 


Township of East Zorra-Tavistock 


July 11/96 


EBA 


741 


Centra 


Township of Sydney 


May 10/96 


EBA 


742 


Centra 


Township of Williamsburg 


May 10/96 


EBA 


743 


Centra 


Town of Gananoque 


July 12/96 


EBA 


744 


Centra 


Village of Iroquois 


July 12/96 


EBA 


745 


Consumers Gas 


Town of Bradford West Gwillimbury 


July 19/96 


EBA 


746 


Consumers Gas 


Town of Niagara-on-the-Lake 


July 19/96 


EBA 


747 


Consumers Gas 


Township of Pakenham 


July 19/96 


EBA 


748 


Centra 


Village of South River 


July 9/96 


EBA 


756 


Centra 


Township of Hope 


Oct. 2/96 


EBA 


757 


Consumers Gas 


City of Vaughan 


Nov. 8/96 


EBA 


758 


Consumers Gas 


City of Welland 


Nov. 27/96 


EBA 


758-01 


Consumers Gas 


City of Welland 


Sep. 17/96 


EBA 


759 


Consumers Gas 


Town of Penetanguishene 


Feb. 5/97 


EBA 


760 


Consumers Gas 


Town of Grimsby 


Nov. 20/96 


EBA 


761 


Consumers Gas 


Village of Cobden 


Nov. 20/96 


EBA 


761-01 


Consumers Gas 


Village of Cobden 


Sept. 26/96 


EBA 


762 


Consumers Gas 


Town of Renfrew 


Nov. 20/96 


EBA 


762-01 


Consumers Gas 


Town of Renfrew 


Sept. 26/96 


EBA 


763 


Consumers Gas 


City of Pembroke 


Dec. 20/96 


EBA 


763-01 


Consumers Gas 


City of Pembroke 


Oct. 2/96 


EBA 


764 


Consumers Gas 


City of Brockville 


In Progress 


EBA 


764-01 


Consumers Gas 


City of Brockville 


Nov. 27/96 


EBA 


765 


Consumers Gas 


Town of Wasaga Beach 


Jan. 27/97 


EBA 


766 


Consumers Gas 


Township of Essa 


Jan. 23/97 



35 



/WW 



CASE 


FILE 


APPLICANT 


CASE DESCRIPTION 


DECISION/ORDER 


TYPE 


NUMBER 






ISSUED 


EBA 


767 


Centra 


City of Orillia 


In Progress 


EBA 


767-01 


Centra 


City of Orillia 


Dec. 20/96 


EBA 


768 


Centra 


Town of Gravenhurst 


In Progress 


EBA 


768-01 


Centra 


Town of Gravenhurst 


Dec. 20/96 


EBA 


769 


Centra 


Township of Severn 


In Progress 


EBA 


769-01 


Centra 


Township of Severn 


Dec. 20/96 


EBA 


770 


Centra 


Township of Oro-Medonte 


In Progress 


EBA 


770-01 


Centra 


Township of Oro-Medonte 


Dec. 20/96 


EBA 


771 


Centra 


Village of Sundridge 


Jan. 17/97 


EBA 


782 


Consumers Gas 


Township of King 


In Progress 


EBA 


783 


Centra 


Town of Bracebridge 


In Progress 


EBA 


783-01 


Centra 


Town of Bracebridge 


Dec. 20/96 


EBA 


784 


Consumers Gas 


Town of Collingwood 


In Progress 


EBA 


786 


Union 


Township of Blandford-Blenheim 


In Progress 


EBA 


787 


Consumers Gas 


Town of Hawkesbury 


In Progress 


EBA 


789 


Centra 


Town of Vankleek Hill 


In Progress 


EBA 


790 


Centra 


Township of Lochiel 


In Progress 


EBA 


791 


Centra 


Town of Longueuil 


In Progress 


EBA 


792 


Centra 


Town of McNab 


In Progress 


EBA 


793 


Centra 


Township of Ross 


In Progress 


Certificate and New Franchise Applications 






EBC 


240/EBA 727 


Centra 


Town of Cache Bay 


July 4/96 


EBC 


241 /EBA 728 


Centra 


Township of Harris 


Sept. 30/96 


EBC 


242/EBA 730 


NRG 


Township of Yarmouth 


June 3/96 


EBC 


243/EBA 733 


Centra 


Village of Tweed 


Aug. 27/96 


EBC 


244/EBA 734 


Centra 


Village of Marmora 


Aug. 8/96 


EBC 


245/EBA 735 


Centra 


Village of Delora 


Aug. 8/96 


EBC 


246/EBA 737 


Consumers Gas 


Township of Adjala-Tosorontio 


July 4/96 


EBC 


247/EBA 749 


Centra 


Township of Hungerford 


Aug. 27/96 


EBC 


248/EBA 750 


Northern Cross 
Pipelines 


Township of Ashfield 


In Progress 


EBC 


250/EBA751 


Northern Cross 
Pipelines 


Township of West Wawanosh 


In Progress 


EBC 


251 /EBA 752 


Centra 


Town of Marmora and Lake 


Aug. 8/96 


EBC 


252/EBA 753 


Union 


Township of Yarmouth 


Sept. 27/96 


EBC 


253/EBA 754 


Centra 


Village of Finch 


In Progress 


EBC 


254/EBA 755 


Centra 


Township of Finch 


In Progress 


EBC 


255/EBA 736 


Union 


Township of Bayham 


Dec. 16/96 & Jan. 17/97 


EBC 


256/EBA 772 


Union 


Town of Port Elgin 


In Progress 


EBC 


257/EBA 773 


Union 


Town of Southampton 


In Progress 


EBC 


258/EBA 774 


Union 


Town of Wiarton 


In Progress 






CASE 


FILE 


APPLICANT 


CASE DESCRIPTION 


DECISION/ORDER 


TYPE 


NUMBER 






ISSUED 


EBC 


259/EBA 775 


Union 


Village of Tara 


In Progress 


EBC 


260/EBA 776 


Union 


Village of Shallow Lake 


In Progress 


EBC 


261/EBA777 


Union 


Village of Hepworth 


In Progress 


EBC 


262/EBA 778 


Union 


Township of Arran 


In Progress 


EBC 


263/EBA 779 


Union 


Township of Saugeen 


In Progress 


EBC 


264/EBA 780 


Union 


Township of Amabel 


In Progress 


EBC 


265/EBA 781 


Union 


Township of Keppel 


In Progress 


EBC 


266/EBA785 


Consumers Gas 


Township of Clearview 


In Progress 



Certificates of Public Convenience and 

EBC 1 39-A Centra 



Necessity 

Hamlet of Edgar 



Nov. 12/96 



Pipeline Exemptions 








PL 93 


Consumers Gas 


Whitby Cogeneration Reinforcement 
Project 


Apr. 2/96 


PL 95 


Union 


TransAlta Cogeneration Facility 


Apr. 23/96 


PL 96 


Consumers Gas 


Highway 410/Derry Road 


Apr. 1 8/96 & Sept.4/96 


PL 97 


Consumers Gas 


NRC Cogeneration Project 


Sept. 23/96 


Uniform Accounting Orders 






UA 100 


Consumers Gas 


Revenue Canada Changes in 
Assessing Practices 


May 24/96 


UA 105 


Union 


TransCanada Gas Services 


Apr. 15/96 


UA 106 


Union 


High Temp Plastic Vents 


Feb. 13/97 


UA 106-01 


Union 


High Temp Plastic Vents 
(supplemental) 


In Progress 


UA 107 


Consumers Gas 


PGVA Difference 


Jan. 21/97 


UA 108 


Consumers Gas 


High Temperature Plastic 
Venting Systems 


Feb. 14/97 



Approvals Under Current Undertakings 

EBO 177-09 Union 



EBO 
EBO 

EBO 

EBO 
EBO 

EBO 



177-10 

177-11 

177-12 

179-09 

179-10 

179-11 



EBRLG 34-18 



Union 
Union 

Union 

Consumers Gas 
Consumers Gas 

Consumers Gas 
Centra 



Provision for Charges for Westcoast 
Corporate Services to Union 

Investment in Ontario OneCall 

Acquisition of CIS Services 
from Westcoast 



Mar. 25/97 

Nov. 14/96 
In Progress 

In Progress 



Transfer of Westcoast Energy Inc.'s 
Part VI Tax Liability for 1997 Tax Year 

Investment in Ontario OneCall In Progress 

Affiliate Transaction with IPL Nov. 13/96 

Technology 

Affiliate Transaction with Feb. 26/97 

Consumers Gas Energy Inc. relating 
to the Integrated Utility Services Project 

Transfer Westcoast 's Part V1 .1 In Progress 

Tax Liability for 1995 



37 



///WW 



CASE 


FILE 


APPLICANT 


CASE DESCRIPTION 


DECISION/ORDER 


TYPE 


NUMBER 






ISSUED 


EBRLG 


34-19 


Centra 


Provision for Charges for Westcoast 
Services to Centra Gas 


Nov. 14/96 


EBRLG 


34-20 


Centra 


Storage Services from 
St. Clair Pipelines 


Apr. 30/96 


EBRLG 


34-21 


Centra 


Investment in Ontario OneCall 


In Progress 


Other Matters 








EBA 


717 


Metalore Resources 
Limited 


Limited Franchise Approval 
Norfolk County 


In Progress - 


EBO 


184 


Landowners 


Sombra Pool Compensation 


In Progress 


EBO 


188 


Ontario Energy Board 


System Expansion 


Aug. 15/96 - Interim 


EBO 


195 


Union/Centra 


Application for Leave to Amalgamate 


Mar. 7/97 


EBO 


196 


Consumers Gas 


Black Creek and Coveny Pools 


In Progress 


EBO 


197 


Consumers Gas 


Black Creek and Coveny Pools 


In Progress 


EBO 


198 


Consumers Gas 


Black Creek and Coveny Pools 


In Progress 


EBO 


199 


Union 


Off Peak Storage - St. Clair Pipelines 


In Progress 


EBRM 


106/PL94 


Consumers Gas 


Drilling Permits - Kimball - 
Collinville & Corunna Pools and 
Tecumseh Gas Storage 


Apr. 1 8/96 & Apr. 22/96 


EBRM 


107 


Union 


Drilling Permits - Bentpath/ 
Rosedale Pool 


In Progress 


EBRM 


108 


Consumers Gas 


Black Creek and Coveny Pools 


In Progress 


— 


— 


Ontario Energy Board 


Market Review 


In Progress 


— 


— 


Consumers/Union/ 
Centra 


Diversification Consultation 


May 1 5/96 



y 

\ 







List of Participants 



The following individuals, companies and organizations intervened in proceedings heard by the 
Board during the 1996-97 fiscal year. 



A.E. Sharp Limited 

Alliance Gas Management 

Amoco Canada Petroleum Inc. 

Association of Major Power Consumers in Ontario 

Canadian Association of Energy Service 
Companies 

Canadian Independent Gas Marketing Association 

Canadian Industry Program for Energy 
Conservation 

CanStates Gas Marketing 

Centra Gas Ontario Inc. 

Cibola Canada Energy Marketing Company 

Coalition of Eastern Natural Gas Marketers (CEN- 
GAS) 

Comsatec Inc. 

Consumers' Association of Canada 

City of Kitchener 

Direct Energy Marketing Limited 

Ecological Services For Planning Inc. 

ECNG Inc. 

Electric Utilities Group 

Energy Probe 

Enron Capital and Trade Resources Canada 
Corporation 

Gazifere Inc. 

Gaz Metropolitan, inc. 

Green Communities Association 

Green Energy Coalition 

Hydro Mississauga 

Independent Power Producers' Society of Ontario 

Industrial Gas Users Association 

Integrated Energy Development Corporation 



KPMG Management Consulting 

Lake Superior Power Limited Partnership 

London GasSave 

London Hydro 

Metalore Resources Ltd. 

Municipal Electric Association 

Municipal Gas Corporation 

Mutual Gas Association 

Natural Resource Gas Limited 

Nishnawbe-Aski Nation 

Northern Ontario Municipal Association 

Northwatch 

Novagas Clearinghouse Ltd. 

Novergaz Inc. 

Ontario Association of Physical Plant 
Administrators 

Ontario Association of School Business Officials 

Ontario Coalition Against Poverty 

Ontario Federation of Agriculture 

Ontario Hot Mix Producers Association 

Ontario Hydro 

Ontario Interlink Industrial Park 

Ontario Native Alliance 

Ontario Natural Gas Association 

Ontario Wide Natural Gas Cash Back Company 
Inc. 

Orillia Water, Light, and Power Commission 

Ottawa-Carleton Gas Purchase Consortium 

Ottawa Hydro 

PanEnergy Marketing 

Pembina Resources 

Petro Canada 



39 



/ / \ I WW 



Pollution Probe 

Power Workers' Union 

Public Interest Advocacy Centre 

Shell Canada 

StampGas Inc 

Stampeder Energy 

St. Lawrence Gas Company Inc. 

Sunalta Energy Marketing Inc. 

Suncor Inc. 

Terra International 

The British Columbia Ministry of Energy, Mines and 
Petroleum Resources 

The Bruce Communities 

The Consumers' Gas Company 

The Corporation of the Town of Tecumseh 



The Heating, Ventilation, Air Conditioning 
Contractors Coalition Inc. 

The London Board of Education Gas Purchase 
Consortium 

The Society of Ontario Hydro Professional and 
Administrative Employees 

Woodland Hills Community Inc. 

The Windsor Utilities Commission 

Toronto District Heating Corporation 

Toronto Electric Commissioners 

TransAlta Energy Corporation 

TransCanada Gas Services Ltd. 

TransCanada PipeLines Limited 

Union Gas Limited 

University Group of Southwestern Ontario 

Westcoast Gas Services Inc. 



\ 




Glossary of Terms 



Affiliate 

See "Non-Subsidiary Affiliate" 

Bulk Power Rates 

The wholesale rates that Ontario Hydro charges 
municipal utilities and direct industrial customers. 



LDC 

Local gas distribution company. 

Non-Subsidiary Affiliate 

A subsidiary of the parent company of a utility, but 
not of the utility itself. 



Buy/SellAn arrangement under which end-users or 
their agents buy gas directly from producers, sell 
the gas to the local utility for transportation to a 
site served by the utility's distribution network, and 
then buy the gas back upon delivery. 

Buy/Sell Reference Price 

The price, approved by the OEB, which a local 
distribution company pays for a direct-purchase 
customer's gas supplies. The reference price is 
based on the utility's weighted average cost of 
gas. Upon delivery, the utility resells the gas to the 
customer at the regular retail rate, which includes 
transportation costs. Buy/sell customers benefit 
when they or their agents are able to purchase gas 
supplies from producers at a lower cost than the 
utility's buy/sell reference price. 

Common Equity Ratio 

The ratio of the common equity to the total capital 
of a company. 



PGVA 

The Purchased Gas Variance Account maintained 
by a utility to track the difference between the 
forecast and actual cost of gas. 

Rate Base 

The amount that a utility has invested in fixed 
assets that are used or are useful in providing 
service, net of accumulated depreciation, plus an 
allowance for working capital and any other items 
which the Board may determine. Rate base may 
also be net of accumulated deferred income taxes. 

Rate of Return on Common Equity 

Utility income applicable to the common equity 
component of a utility's total capital, that a utility 
earns or is authorized to earn, expressed as a 
percentage of the amount of common equity 
approved for inclusion in the utility's capital 
structure. 






41 



/ // WW 



Rate of Return on Rate Base 

Utility income, after taxes, that a utility earns or 
is authorized to earn, expressed as a percentage 
of the rate base. This return is not guaranteed 
to the utility. Rather, this is the return that the 
company has a reasonable opportunity to earn 
given forecast conditions. 

Revenue Deficiency 

The shortfall between the revenues required to 
achieve the allowed annual level of earnings 
previously established by the Board and the 
revenues that will be produced with currently 
approved rates. 



Revenue Requirement 

The amount of revenue that a utility must recover 
through rates to cover its costs of providing 
service. The costs include such items as: operating 
and maintenance expenses, depreciation, taxes 
and the return on capital employed. 

WACOG 

A utility's weighted average cost of all gas 
purchased in a specified time period. 



Revenue Excess [or Revenue Surplus] 

The difference, if positive, between the annual level 
of earnings that will be produced with currently 
approved rates, and the allowed level of earnings 
established by the Board. 



\ 




The Ontario Energy Board is located at: 
2300 Yonge Street, Suite 2601 
Toronto, Ontario M4P 1E4 
Telephone (416) 481-1967 

Copies of the Annual Report in English and in 
French and other Board publications may be 
purchased from Publications Ontario, 880 Bay 
Street, Toronto. Telephone (416) 326-5320. 

Out-of-town customers please contact 
Publications Ontario, Mail Orders, 50 Grosvenor 
Street, Toronto, Ontario M7A 1N8. Toll-free long 
distance: 1-800-668-9938. 

Photograph by V. Pietropaulo. 

Designed by Staigh & Green Communications Inc. 



» * Printed in Canada on Beckett Expression 
containing 20% recycled fibre with 
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